Move fast for a good savings rate

For many people over 60 and in retirement, the Bank of England’s massive 1.5% cut in the base rate on Thursday will not come as the good news it is being hailed as in most quarters.

The fact is that many older people have paid off their mortgage and have money which they need to save or invest wisely. With the stock market still in turmoil many would naturally turn to fixed-rate building society accounts or bonds as a safe haven for their money.

The trouble is that when the base rate comes down, so too do saving rates. And financial institutions are not as slow to bring down saving rates as they are to bring down mortgage rates. It could leave many over 60s rushing to find the best rates in the hours and days after the rate cut. The advantage of moving fast is to lock your money on a high rate. On the downside, it means that your money will be inaccessible for the period of the fixed rate.

Many providers actually pulled their fixed-rate accounts on the same afternoon as the rate cut. Bank of Cyprus UK, Yorkshire, Progressive, Buckinghamshire, Mansfield and Chelsea building societies scrapped their one-year deals within hours of each other. Derbyshire Building Society also lowered the rate on its one-year bond by 0.5% to 6%.

Savers can earn a rate of 6.85% through the one-year bond offered by Saga, part of the HBOS group, and a great rate of 7.02% on its six-month bond.

You could get a better deal if you are willing to tie your money up for longer, with the two- and three- year market: Anglo-Irish at 7% over two years, and Bradford & Bingley, Anglo-Irish Bank and Halifax at 6% over three years.

But you’ll have to move fast!

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