Is it time to lock in medium to long-term savings rates?
While there has been a return of competition, albeit very light competition, in the UK savings market there are some with nest eggs who are considering locking in savings rates for the medium to longer term. However, is it the right time to lock in to current rates?
The main factor which will impact upon the value of savings and savings rates in the UK in the short term is the rate of inflation. This increased significantly in December hitting a high of 2.9% which surprised many analysts and was well above expectations. As a consequence unless inflation is subdued in the short term we could see UK base rates begin to move higher which would in turn push UK savings rates higher. However, the situation is not as clear cut as some may have you believe!
If UK inflation does fall, as the Bank of England expects, we could see base rates remain at 0.5% for the majority of 2010 purely and simply to increase liquidity and support the economy. The forthcoming ending of the quantitative easing program is another factor which could influence UK base rates with some concern that the economy could weaken when this support is taken away. On the whole, as the UK economy improves UK base rates will move higher but when this will be is anybody's guess!
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