The building society announced an interest rate affecting all of its off-sale variable rate savings accounts, which will come into effect later next month on December 1, 2022. Savers will see their rates rise up to 1.50 percent later this year as Nationwide attempts to help its customers get better returns amid the cost of living crisis. One of the factors contributing to the current economic downturn is “high-inflation” which is particularly hurting peoples’ savings accounts.
Among the products affected is the building society’s Start to Save 2 account which will increase for new and existing members by 1.50 percent to five percent.
Customers savings with Nationwide’s Flexclusive Regular Saver should see interest rates rise to four percent next month.
Notably, the building society’s Help to Buy ISA is set to pay three percent AER as of December. Furthermore, Nationwide is raising interest rates on its children’s accounts by up to 0.50 percent.
The savings accounts impacted by this include the Child Trust Fund, Junior ISA and Future Saver.
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Each of these will pay an interest rate of three percent, while the Smart Limited Access will have a rate of 2.50 percent.
Customers who have either Loyalty Saver, Loyalty ISA and Loyalty Single Access ISA account should see their interest rates go up by 0.50 percent to 2.50 percent.
With Nationwide’s limited access range, previous issues of the Triple Access Online ISA (11-13) and Triple Access Online Saver (12-14) will have rate hikes of between 0.4 percent to 0.50 percent.
Every instant access account from the building society, including Instant Access Saver, Instant ISA Saver and Cashbuilder, will now pay either 0.75 percent, 0.80 percent or 0.90 percent AER, after next month’s interest rate rise.
Despite this latest interest rate hike, the building society’s offering is unable to compete with the UK’s Consumer Price Index (CPI) rate of inflation reaching 11.1 percent for October 2022.
This is the highest recorded inflation in 41 years and experts forecast the rate to continue to remain high for the foreseeable as the UK’s ongoing cost of living crisis continues to hurt peoples’ finances.
In an attempt to address this dire economic situation, the Bank of England’s Monetary Policy Committee (MPC) has raised the nation’s base consecutively over the last couple of months, now reaching three percent.
As a result, banks and building societies have passed this rate increase onto their customers. Nationwide is among the financial institutions hiking rates for savers after the central bank’s decision.
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Ian Hepworth, the director of Funding Solutions UK, highlighted that savers could benefit from the likely interest rate rises which will follow this week’s inflation announcement.
Mr Hepworth explained: “11.1 percent inflation is serious and then some. At eight percent, it meant that households had lost the equivalent of one month’s income.
“Now their real incomes have dropped even further. This will leave little income for the average household to save or invest. Given inflation is still rising we will likely see further increases to the Bank of England base rate, which will help savers but hammer borrowers.
“Coupled with the expected changes to the R&D tax credit scheme in the Autumn Statement, rising interest rates could well stifle investment and innovation. We need innovation to increase productivity so that we can achieve economic growth, but rising rates will scupper that.”
Carla Hoppe, the founder of Wealthbrite, noted that investing may suit savers better in a “high-inflation” environment. The finance expert outlined which products will be useful for those with high savings goals.
She added: “Inflation is to cash what a moth is to your favourite jumper. Three questions all savers should be asking in a high-inflation environment are, what are my savings goals, how quickly would I need access to my cash if my saving goal is met, and am I getting the best reward for the hard work I’ve put in to save?
“It may feel like hard work but switching accounts can be a simple and effective way to get a higher interest rate on cash savings. Many banks can now do a switch for you in a matter of days, taking away a lot of the admin hassle. For people with longer term savings goals, investing may be the ticket to beating inflation.”
The financial expert is encouraging people to explore different investment options, such as a Stocks and Shares ISA, which could be the best bet to mitigate inflation’s impact on savings.