Consumers

The decision by the Post Office on Friday to withdraw its three-year bond paying 1.3% is a clear illustration of the impact already being felt by savers. According to the data provider Moneyfacts, 156 cuts were made to individual savings accounts during July.

“It is currently a dismal time to be a saver. Not only have they had to put up with years of tumbling returns, but the possibility of a base rate cut will only lengthen savers pain further,” said Charlotte Nelson of Moneyfacts.

There are a few two-year bonds paying 1.8% interest, but from little-known providers. Big banks are paying much less, including 1% on a two-year bond at Lloyds. Even this may come down if the base rate falls next week. Some observers says savings rates could fall to virtually zero.

“Savers have seen interest rates tumble to historic low levels and whilst providers do not have to pass any cut in base rate on to customers the likelihood is that they will use it as an excuse to cut rates,” Nelson said.

For borrowers with tracker deals that are pegged to the UK interest rate, monthly costs will fall from September. The Nationwide building society has just under 600,000 people on its “base mortgage rate”, which is charged at 2% above the Bank base rate.

A borrower with a £150,000 Nationwide mortgage will see repayments cut from £673 a month to £654 if Carney cuts interest rates to 0.25%. Interest-only mortgage customers will see the cost of servicing a £150,000 loan drop from £313 a month to £281. Borrowers on fixed rate deals will see no change, but deals should get cheaper in the next few weeks, with two year fixes below 1% and five year deals under 2%.

The “standard variable rate”, however, the rate people move on to after the end of a fixed rate deal, is likely to remain static at most banks and building societies. Santander’s is high at 4.74%, while Halifax’s is 3.99%. Even so, an interest rate cut may stabilise a nervous housing market hit by Brexit, and give buyers confidence to go ahead.

It could also weaken the pound further against other big currencies, pushing up costs for holidaymakers and raising the price of imports to the UK. If import costs rise then inflation could rise too, bringing increases in day-to-day expenditures such as food.

Got money in help to buy Isa which still pays 4% so not fussed


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+1, though the owner of that idea is now gone, so... I have to say, Osbourne did wonders for my finances while he killed everyone else's

I didn't know you were part of the 1%