Interest Rates - Latest: Savers Urged to Move Quickly to Make the Most of Interest Rates as Inflation Will "Fall Quickly" (2023)

Important points
  • The Bank of England hikes interest rates to 4% but suggests this could be the last hike and any recession would be 'very superficial'.
  • Ed Conway:We are clearly reaching the peak in UK interest rates
  • Explained:What is interest?
  • What does the rate hike mean for first-time buyers?
  • Savers urged to act quickly to get the most out of interest rates
  • Andrew Bailey says inflation could 'fall quickly'
  • Special Report by Jason Farrell:"I've Spent All My Savings And Now I Can't Retire"
  • Live coverage by Faith Ridler and Brad Young


That's it for today's live report.

Thank you for following a busy day of UK economic news as the Bank of England hiked interest rates to 4%.

We'll be back with updates tomorrow when another wave of strikes hits the country, this time causing severe disruption to national rail services.


Very expands the Value range by 1,000 products

Drapers reports that online retailer Very will be adding 1,000 more products to its everyday range.

The new items will be a mix of 540 clothing lines and 400 lifestyle products, most of which cost £30 or less.

The value range is aimed at customers affected by the cost of living crisis and includes items from school uniforms from 5 euros.

Drapers reported that everyday products are on average 20% cheaper than the site's V by Very range.


Royal Mail workers are planning another strike

Royal Mail workers are set to strike again over wages and working conditions.

Mail delivery is likely to be disrupted when members of the Communication Workers Union (CWU) move out on February 16.

A series of strikes were held before Christmas and Arbitrator Acas brokered new talks to break the deadlock, but to no avail.

A Royal Mail spokesman said: "By announcing further damaging strike action, the CWU has shown that it is uninterested in settling this dispute and remains focused on further damaging our business.

"The CWU's erroneous belief that further industrial action will eliminate the need for change and force an improved offer misleads its members and jeopardizes their long-term job security."

He said the union's 18-day strike so far has cost the company £200million.


Mortgage rate hike is a 'hammer blow' for struggling families

Soaring mortgage payments, caused by rising interest rates, are a "hammer blow" to families struggling with the cost-of-living crisis, the Liberal Democrat leader said.

Sir Ed Davey said homeowners were paying the price for the mini-budget announced by former Prime Minister Liz Truss in 2021.

"This is a huge blow to working families across the country," he said.

“Today's decision to raise mortgage rates added fuel to the fire of this cost-of-living crisis.

“The blame clearly lies with the Conservative government, whose failed budget last year sent mortgage rates skyrocketing.

"Their utter failure to bring down inflation has left homeowners paying the price."


Higher interest rates don't mean better savings rates at big banks - Martin Lewis

Big banks are unlikely to use rising interest rates as an opportunity to offer customers a better return on their investments, said Martin Lewis.

The Bank of England today hiked interest rates from 3.5% to 4%, but as the move was signaled well in advance, banks will already have factored this into fixed-rate savings accounts, according to the financial journalist.

Lewis, who founded consumer advice website, said he expects any increase in returns to come from easily accessible savings accounts.

"Most large bank savings accounts will continue to pay very little, so check, file and switch," Lewis tweeted.

The 0.5% rate hike also means mortgage holders will have to pay an extra £25 a month for a £100,000 mortgage, she added.


Ian King's latest podcast is now available

On today's episode, business presenter Ian King speaks with the CEO of Centrica, parent company of British Gas, afterwardsNews The company is under investigation for forcing prepaid meters on vulnerable customers.

It also looks at Shell's record profits amid the cost of living crisis.


Car insurance prices up 8%

According to the Association of British Insurers (ABI), the cost of insuring a vehicle has increased by 8% in the last three months of 2022.

The average price of personal car insurance was £470.

The policies have responded to rising vehicle repair costs caused by higher energy prices, the cost of paint and delays in finding parts, ABI said.

Across 2022, the average price paid to renew an existing policy fell by 7% compared to 2021 to £392, while new coverage rose by 11% to £500.

The changes reflected the introduction of new pricing rules, ABI said.

Since January 2022, the Financial Conduct Authority has ensured that the price paid by renewing customers does not exceed the price charged to a new customer for the same policy.


The European Central Bank is raising interest rates by 0.5% and the tone is different from the UK

Away from Britain for a moment...

The European Central Bank has been pushing for a half-point rate hike to fight inflation and intends to do the same again in March.

It is aggressively raising interest rates to fight inflation, which has slowed but is still too high (8.5% per year) and hurting households in the 20 countries that use the euro.

The Bank of England was also big on Thursday, up a half-point, but the Federal Reserve pulled back a day earlier, slowing to a quarter-point rise.

The ECB, which also hiked half a point in December, "will stay the course by raising rates significantly at a steady pace," said ECB President Christine Lagarde.

"Now you're going to say, 'Well, yeah, but what about after March? Does that mean you've reached the peak or the peak?'

"No no no no. We know we still have work to do. We know we're not done yet.”

It followed the Bank of England's move to hike rates by half a point to 4%, but in contrast the bank indicated it is not sure more rate hikes will follow.


'Good news for Britain's debt mountain' as Treasury bond costs fall

The market reaction to the Bank of England interest rate decision will be good news for both the Chancellor and homeownersunser Business-Moderator Ian King.

He said markets believe interest rates will not exceed 4.22% and the cost of the Treasury has come down.

"It would be good news for Jeremy Hunt to examine the UK's massive debt and debt service costs," King said.

"There is some solace for homeowners and businesses who also have to deal with the borrowing costs involved."

The Bank of England is "slightly more optimistic" about the future of the economy, he said.

He expects a recession, but shorter and shallower than expected in November.

"It now seems very likely that the UK will have avoided a recession in the second half of [2022]," King said.

The Bank of England hiked interest rates by 0.5% to 4% at midday.


Savers urged to act quickly to get the most out of interest rates

The Bank of England could help savers by raising interest rates to 4%, say financial experts.

After a period of extremely low savings rates, below 1%, a new account, possibly with a new bank, can offer a better return, according to Alice Haine, personal finance analyst at Bestinvest.

But given the bank's indications that interest rates may have peaked, savers should consider acting before inflation abates, he said.

There are "good options" for savers, said Victor Trokoudes, chief executive of budgeting and investing app Plum.

“Hopefully this new policy rate will benefit savers. It's good to see that some banks have now adjusted their interest rates," he said.

"With a wide range of interest rates available from banks and through smart money apps like Plum, there are some great options to boost your savings."

Jason Ferrando, CEO of money lending platform easyMoney, urged more banks to increase returns for their customers.

"While this recent rate hike has hurt adjustable rate borrowers, for investors and savers there is a downside: the return on your savings could do better thanks to today's Bank of England decision."

He continued, "However, many large banks and investment platforms have not increased their returns to investors in the way we have recently, and our industry needs to do more to do so."

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