Is it time for savers to take advantage?

AST Thursday the Bank of England (BoE) cut base rates for the fourth time this year, handing mortgage holders an early Christmas present but dealing a blow to savers hoping to get a decent return on their deposits.

- By HARVEY JONES

The base rate now stands at 3.75%, down from 4.75% at the start of this year, but the pace of decline is likely to slow next year.

Savers and borrowers now have a decision to make - as does anybody considering an annuity for retirement.

While savings rates will fall, there will still be some top deals around, yet banks and building societies could be slow to pass on cuts to their standard variable rate mortgages.

There's a lot going on at Christmas, but this isn't the time for inertia.

RATE CUT

In one respect, the cut was bad news. With inflation running at 3.2% in November, well above the BoE's target of 2%, the monetary policy committee (MPC) only agreed a rate cut on a narrow majority of five to four.

Julian Jessop, economics fellow at the Institute of Economic Affairs, said the MPC is concerned about subdued economic growth. “Weakness of the economy and mounting job losses offset worries about inflation, but only just. This is not much to cheer.”

John Wyn-Evans, head of market analysis at Rathbones, said the rate cut isn't enough on its own to revive the ailing UK economy, which shrank by 0.1% in October and November.

“Confidence remains low and the recent Budget failed to introduce growth-friendly measures, while increasing taxes by £26billion.”

SAVINGS

Rates were falling before Thursday's meeting and this is likely to continue.