Mini by name - not by nature!
Emergency mini-budget - and all the other news!

Well, what an extraordinary week last week was - to put it mildly.

There’s so much to report on that it's hard to know where to start. From the emergency mini-budget and the fallout from that, including the extraordinary increase in fixed term bond rates as a result, to the latest base rate hike – and the good news for NS&I Premium Bond holders that the prize draw fund rate is to be increased. And, let's not forget all the other rate rises that we’ve seen over the last couple of weeks.

But first, the mini-budget. Mini by name but not by nature. Some quite extraordinary announcements were made last Friday. Our colleagues at The Private Office have pulled together a summary of the key announcements that could affect our finances – although be aware that since this article was published, there has been a subsequent U-turn to the abolishment of the additional rate of income tax and dividend tax of 45% and 38.1% respectively.

🔖 Read: Mini-Budget 2022 - How it might affect your finances

Of course, before all of this, there was another Monetary Policy Committee (MPC) meeting, and another base rate hike. This time it’s again a 0.50% rise, increasing the base rate to 2.25% - a 14 year high. The good news is that this does mean that savings rates are on the up too – but there are some areas of the market that are rising faster than others. In an extended version of our regular Rates Rundown, this week we'll take a look at how much rates have risen this year, as well as over the last couple of weeks.

🔖 Read: Rates Rundown - Base Rate increases to 2.25%

What you will see in the article above is the rapid rise in the rates of short term fixed rate bonds, something that was predicted by the markets as gilt yields rose dramatically in the immediate aftermath of the mini budget. The Bank of England has since stepped in to try and calm the situation, but why did they need to do this?

🔖 Read: Bank of England intervenes with £65 billion purchase of government gilts to calm the markets

Onto some more cheerful news and it was a welcome announcement from NS&I this week, that the rate of interest that applies to the Premium Bond prize fund is to rise from 1.40% to 2.20%, effective for the October prize draw. But is that enough to keep Premium Bond holders happy? It’s a tale of two attitudes in the Bowes household!

🔖 Read: Should I stay or should I go – is it time to ditch Premium Bonds?

That’s it from us this week. See you in a couple of weeks' time. In the meantime, with things changing so rapidly, remember to keep a close eye on our best buy tables. Why not sign up for our Weekly Best Buy Table email, delivering the top rates to your inbox once a week.

And if you want to be kept up to date with new competitive savings accounts being launched, sign up for our free Rate Alert service. We'll send you an email when we see new savings accounts that you might be interested in.

All the best

Anna

Anna Bowes
Co-founder
Savings Champion

Mini-Budget 2022 – How it might affect your finances

‘Mini’ denotes a miniature version of something. This Mini-Budget however has had immediate seismic economic consequences for the UK. *

The huge tax cutting package’s aim is to stimulate economic growth. This is in addition to the unprecedented support and borrowing to help households and businesses to reduce their energy bills over the next six months.

The unmistakeable backdrop to this statement is our cost-of-living crisis, with inflation having breached 10% recently, and the expectation of continued increases in interest rates by the Bank of England to try to contain it. The aim therefore was to give households and businesses more financial capacity to spend and invest, to help grow the economy.

*Please note that since this article was published, there has been a subsequent U-turn to the abolishment of the additional rate of income tax and dividend tax of 45% and 38.1% respectively.

What were some of the key announcements? >>

Bank of England intervenes with £65 billion purchase of government gilts to calm the markets

The Bank of England (BoE) made a dramatic u-turn last week (28^th September), pledging to buy £65 billion of government gilts, to avoid a meltdown in the financial markets and in particular the UK pensions sector. The BoE had previously been on the brink of starting to sell gilts as part of an effort to get inflation under control, but this has now been suspended.

From a cash savers perspective, the precursor to this move was a rapid increase to the rates on offer on fixed rate bonds since the mini-budget announcements on Friday 23^rd September. In particular the short-term bonds.

How will this affect the fixed rate bond market? >>

Should I stay or should I go? Is it time to ditch Premium Bonds?

A chat with my partner who has been a long-standing fan of Premium Bonds, in addition to the news that NS&I is to raise the rate on the Premium Bond prize fund from the October 2022 prize draw, prompted me to write this article.

Tim has been one of the lucky ones when it comes to his Premium Bonds but more recently his returns have been downright disappointing. So, with interest rates rising significantly elsewhere, he has made the decision to jump ship. Even the news that the prize fund rate will be increasing to 2.20% from its current level of just 1.40% will not stop him. But what will others do?

What will you do?>>

Rates Rundown - Base Rate increases to 2.25%

With everything else that’s been going on recently, we have almost forgotten that there was another Bank of England Monetary Policy Committee (MPC) meeting last week. At that meeting, for the seventh time in a row the MPC voted for the base rate to be increased – this time by 0.50%, to 2.25% - the highest it’s been for 14 years.

So it’s unsurprising that savings rates are continuing to rise. But this time, it’s not just the base rate that has caused some of the changes.

What are the best rates right now? >>

Keep up-to-date with all the best savings accounts on the market

> Interest-paying Current Accounts†
> Easy Access Accounts
> Fixed Rate Bonds
> Variable Rate Cash ISAs
> Fixed Rate Cash ISAs
> Notice Accounts
> Monthly Income Accounts

> Regular Savings Accounts
> Children's Savings Accounts
> Junior Cash ISAs
> Sharia Fixed Term Accounts
> Business Easy Access Accounts
> Business Fixed Rate Bonds
> Business Notice Accounts

Our Best Buy Tables are based on whole of market research, independent and have no commercial bias, ensuring that you can rely on them to make an informed decision.

*We are occasionally paid by some providers if you click through from our Best Buy Tables and open a savings or current account with them. We will never accept a payment that compromises in any way our independent, whole of market approach to providing information on savings products. For clarity we will indicate those companies who remunerate us with an asterisk (*).

†High interest current accounts often have a number of conditions attached to qualify for the headline rate. Please ensure you carefully read the terms and conditions before proceeding. Many of these current accounts do not require customers to switch their main account.