Cascade Commentary

"When competition works well, consumers are empowered as well as informed", says the Financial Conduct Authority. Here at Cascade Cash Management, we work every single day to empower savers with clear and transparent information to make informed choices in their cash savings during challenging times of low interest rates. 

We track the largest cash dataset in the UK market on a day-by-day basis and regularly conduct research to keep our clients informed as to the trends in savings rates. As we enter July, we have taken another review of savings rates to see whether the increases we witnessed in the first quarter of 2017 are continuing into quarter two. 

At the start of the year, Personal savers could expect to earn 2.05% annually on a 5 year fixed term bond. In the first quarter this crept up to 2.30% but today, savers can earn 2.50%. Based on these rates, an £85,000 deposit earns £382.50 more annually today than at the start of the year.

The same is true for most client types. Corporates can earn 2.20% on a five-year term today as opposed to 1.80% at the start of the year, while for Charities this is 2.00% and 1.75% respectively. These rises are largely being driven by rising inflation, which reached 2.9% in the latest figures year-on-year. This led to the closest vote for a rate rise for quite some time, with a 5 to 3 vote for maintaining bank rate at 0.25%.

Disagreement has emerged in the Monetary Policy Committee (MPC) as some believe the inflation overshoot to be temporary whereas others feel it may be longer term. For those that feel it is a temporary overshoot, the cost of higher interest rates on growth and employment levels appears too great when considering a rate rise. For those on the other side - including Kristin Forbes, Ian McCafferty and Michael Saunders - the impact of higher inflation needs to be tempered by a rise in bank rate.

What is clear is that the market is expecting a rate rise in the near future - be that in the next 12 or 24 months. Banks and Building societies are therefore being pushed into raising rates to incentivise medium to long term deposits.

We have seen positive increases for some shorter-term accounts too but not for all client types. Personal savers can earn up to 0.30% more on Instant Access today than at the start of the year but Corporate and Charity short-term rates have fallen by between 0.10% and 0.60%.

As a saver, it's important to target the top of the market particularly as inflation is set to rise over the coming years. The MPC voted 5 to 3 in June 2017 to maintain interest rates at 0.25% and the discomfort for rising inflation is clear. The committee next meets on 3 August 2017 and we will keep you updated should a rate change occur at that time.