City Road Communications: Finance experts react to BoE's raise of interest rates

August 3, 2023

In light of the Bank of England's decision to raise interest rates to 5.25%, City Roads Communications has shared the comments from several industry experts reacting to the news. 

Lily Megson, Policy Director at My Pension Expert, said:

'Another interest rate hike means more pain for borrowers, but it ought to come as good news for savers. Yet ‘ought’ is the imperative word here. Sadly, despite the Bank of England pushing the base rate higher and higher in its fight against inflation, many high street banks are continuing to fail to pass on these advantages to their customers. This is deeply disappointing, adding to the financial strain on savers in the midst of a cost-of-living crisis that is far from over.

The Financial Conduct Authority is right to scrutinise the banks for not passing on better rates, and action cannot come fast enough. Britons need all the support they can get in the current economic climate, which is making financial planning very challenging. However, banks’ interest rates are just one area where change is needed. It is important that customers feel supported and empowered to make more informed decisions. Making information regarding savings or investment options available would be a step in the right direction. So too would be improving access to affordable advice.

Now more than ever, it is crucial for banks and the wider financial services industry to prioritise consumers’ interests and uphold regulatory, ethical and moral commitments to putting consumers first. By doing so, they can regain trust and contribute to a more stable financial landscape for everyone.'

Mohsin Rashid, CEO of ZIPZERO, said:

'Although inflation is finally showing signs of slowing, another interest rate hike is a daunting prospect for consumers. As the Bank of England (BoE) seeks to limit spending in the economy, households have to contend with surging mortgage payments, while those reliant upon borrowing to afford record rent and food costs are met with costly repayments.

At the same time, a core tenet in the BoE’s strategy - encouraging people to put money aside - is being criminally undermined by many banks which are failing to pass on rising rates to their customers. No increase in the base rate is worthwhile if consumers don’t see value in saving, though it is encouraging to see the regulators finally cracking down on this.

Households understand that it is the BoE’s responsibility to control inflation. However, the other wing of the UK economic high command, the Treasury, must ask if it is right that the pain being felt is universal and consider what support it can offer to households which are most struggling.'

Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said:

'There has been a huge difference between the base rate and the interest rates made available to savers by high street banks. As inflation remains elevated, it is critically important that savers have access to competitive rates. Positively, as of Monday, the new Consumer Duty rules mean that all banks will be under more pressure to do right by consumers and pass on today’s interest rate increase to savers without undue delay.

Time and time again, challenger banks have proven themselves to be more reliable at providing customers with competitive products as interest rates change. Consumers should not just assume that their bank will offer them the best deal. Searching the market for alternative products remains vitally important, and branching out from established high-street names remains one of the best ways for people to lock in a better deal.

For people in a position to put away a lump sum, there are a number of fixed-rate products currently topping the base rate that savers can make the most of to grow their money. Crucially, these are covered by the same Financial Services Compensation Scheme (FSCS) protection in the same way as traditional banks, which will offer consumers security and peace of mind.'

Chieu Cao, CEO of Mintago, said:

'Another interest rate hike, another sucker punch that will leave millions reeling. We can be sure employers and managers are seeing the headlines about those drowning in skyrocketing debt and repayments, but how many have actually taken action to support their employees through these challenging times? In fact, how many even know which of their staff are struggling with issues such as higher interest rates and the cost-of-living crisis?

Unfortunately, too many businesses are not having the right conversations with staff – talking about financial stress remains a workplace taboo, and people's wellbeing is being harmed as a result. But now is the time to step up. There is no use pointing the finger of blame at the Bank of England, government, banks or anyone else. Business leaders must understand the critical role they can play in supporting employees at this time – prioritising financial wellbeing over other light-touch perks and benefits is a must in the current climate.'