Savers’ fortunes on the turn with rate rise on the horizon

Figures produced by the former financial adviser and founder of website Savings Champion show the number of rate reductions for existing savers reached its highest level for 21 months in September, at 241, before dropping to 123 in October.

As of 15 November, that figure stood at 30, at that time the lowest monthly number seen since December last year when there were 27 rate cuts.

Although a total of 38 rate cuts have already been announced for December and January 2014, Ms Bowes said the number was “levelling off” after forward guidance was introduced by Mark Carney, governor of the Bank of England, in the autumn.

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She said: “We are now seeing the downward push on savings rates slowing down and like an oil tanker, it is stopping and turning around slowly.

“The noise about interest rates rising next year is also contributing, as is the fact that the funding for lending scheme is due to end in January 2015. Providers will start looking at alternative ways to raise money ahead of time and there will be more competition for savers’ deposits.”

Her comments coincided with a renewed campaign to raise the tax free ceiling on the Isa allowance for cash.

As George Osborne prepares for the delivery of his Autumn Statement on 5 December, the British Bankers Association has urged the Treasury to allow savers the option to allocate their entire tax-free allowance, currently £11,520, in cash, rather than allowing only half that level to be used.

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The adviser: Andrew Dawson, managing director of Cornwall-based Coast To Coast Financial Planning Services, said: “Anything that promotes long-term saving should be vigorously encouraged and the fact that clients cannot save the same amount in cash as in stocks and shares is an anomaly.”

The industry body: Tony Vine-Lott, director general of the Tax Incentivised Savings Association, said “Given the current economic situation, it is very unlikely that the Chancellor will support those proposals. As a body, we have not pushed for special treatment of cash Isas and even if the limit was raised, one would have to question whether people will be able to put that much away in this current climate.”