March 11, 2020

Savings accounts hit hard by massive interest rate cuts

Bank of England Base Rate drops to 0.25%

As a result of the recent coronavirus outbreak, today, the Bank of England has followed in the footsteps of the US Federal Reserve in taking unscheduled action to counter the expected economic disruption from the virus.

This marks the largest of a whole host of wide scale of measures implemented in preparation for the coronavirus outbreak impact on the UK economy. Starting from Wednesday, a budget was set to significantly increase public borrowing through “timely and powerful” measures for “maximum impact”, Mark Carney, the outgoing bank governor claimed.

On Tuesday, the Monetary Policy Committee unanimously agreed to slash the main bank rate by half a percentage point to 0.25%. The cut in theBase rate is the lowest recorded in history, leaving almost no possibility for rates to fall any further.

Although on the face of it this may appear to be the most impactful decision to be enforced, the BoE has said that the move to offer banks four years of cheap funding may be the most effective in “bridging a potentially challenging period. ”The consensus being that banks can maintain regular lending throughout this crisis despite facing temporarily losses.

The bank went on to state that “the reduction in the bank rate will help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability of finance.”

The Prudential Regulation Authority along with Andrew Bailey, the governor of the BoE as of next week, share the same objection against banks behaving in a negligent manner as a result of the changes in monetary policy. Mr Bailey warned that “banks should not increase dividends or other distributions such as bonuses.”

Mark Carney, outgoing governor of the bank, accompanied MrBailey at a joint news conference on Friday Morning. Mr Carney continued to stress that these measures were designed to “keep firms in business and people in jobs” over a period of “temporary” disruption. Mr Carney had said that the BoE had recorded “anecdotal evidence where we have seen a sharp fall in trading conditions particularly in retail.”

These monetary policy changes are set to offer support for all financial lenders through this troubling period. A banks analyst at Investec, Ian Gordon, claims the funding scheme should offer “some partial relief for high street banks against the adverse impact of the rate cut” on their net interest margins.

To the surprise of many, Mr Gordon continued that the biggest beneficiaries of the funding scheme would be smaller, specialist lenders that pay more for customer deposits.

For a long time, savings accounts have produced less and less returns for savers and so many have had to look for other alternative and more lucrative investment options. So, unless you have a fixed-rate savings account, the news of the Base Rate falling should be the last straw to finally swap investments. Now is the most profitable and wisest time for savers to look into investing into the property market.

Hands-off Property Investments

Property Investments with Elavace allow you to invest in the UK property market without lifting a finger. This means that you can earn up to 10% annual returns on your investment AND enjoy capital appreciation over time. And regardless of how hard the Coronavirus pandemic has hit the UK economy, people still need somewhere to live so the tenant base and buyer market is always there for you to either keep renting out or sell your property further down the line.

Investing into the property market doesn’t mean you must add onto the stress of a busy work and family life. We at Elavace work to take away as much stress from the start, during and end of your investment. We offer the chance to invest in property in a completely hands-off fashion, meaning you’ll never have to worry about;

To get in touch, call us on 0151808 1042 and speak with one of our consultants who can offer more information.

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