Earlier this year, we published an article looking at how interest rates could move in the rest of 2023.

One of the predictions that many commentators had been making came true in May, with the Bank of England (BoE) increasing its base rate for the 12th consecutive time to 4.5%. We’ve now also seen the 13th consecutive increase in June, rising to 5%. This is the highest level since April 2008.

The base rate broadly determines interest rates you’ll see across the economy. From mortgages to personal loans, an increase to the base rate can have a marked impact on the money you borrow.

Another key area the base rate can affect is your savings. Most banks and building societies will at least partially use the BoE’s rate to determine the interest rate they’ll pay to you when you hold your money with them.

So, how might this latest increase affect your savings, and what could you consider doing to ensure that you’re still making the most of your money? Read on to find out more.

You may have seen an increase in the interest you receive

When the BoE increases the base rate, the first thing you might notice is that you receive a higher rate of interest on your savings accounts.

Interest rates have been comparatively low for a prolonged period of more than a decade. The BoE reduced its central rate to 0.5% in 2009 and, for the following 13 years, it didn’t rise above 1%.

In fact, it even reached a historic low of 0.1% in 2020, as the BoE cut rates to stimulate the economy amid the worst of the Covid-19 pandemic.

But since this nadir, the base rate has risen 13 times consecutively. It rose to 4.25% in March, 4.5% in May, and after inflation figures were higher than expected in June, to 5% today.

The main change you might see to your savings when the base rate increases is that the interest rate you’re paid also goes up.

This is Money reported on five providers who confirmed they would be boosting rates on their accounts after the previous base rate increase in May, with the Guardian reporting in June that HSBC would be raising rates by as much as 0.75% on some of its accounts.

Meanwhile, This is Money also noted five providers who pre-empted the June increase, offering accounts with rates of 4% or higher ahead of the base rate rise to 5%.

According to Moneyfacts, the highest available rate on an easy access savings account was 4% as of 22 June 2023.

So, it’s possible you’ve seen an increase in the interest you receive on your savings.

Savers often use this opportunity to shop around for the best savings rates possible

When rates are rising and more lucrative options are available, many savers use this as an opportunity to find a higher savings rate.

You may also be looking at other options outside of instant access savings. For example, you might be looking at notice accounts, in which you must give a certain amount of notice before you can withdraw your money.

Alternatively, you could be considering bonds, which pay a regular “coupon” to you each month and return your money at the end of a fixed term – often one, three, or five years.

These types of accounts often have higher rates than standard easy access accounts. As Moneyfacts data showed on 22 June 2023, you could have found rates of:


  • 4.75% for a 200-day notice account
  • 5.70% for a one-year fixed rate bond
  • 5.55% for a five-year fixed rate bond.


However, while there may be these higher rates available, it’s worth bearing in mind that your cash savings may still not necessarily keep up with the rate of inflation.

The Office for National Statistics recorded inflation to be 8.7% in the 12 months to May 2023, the same rate recorded in April 2023, too. Although this is lower than the 10.1% recorded in March, it’s still considerably higher than the best savings rates.

As a result, your money could still be losing value in real terms, even if you choose to lock it away for a period.

Cash savings often outcompete inflation in the long term, but not investment returns

With the knowledge that your cash could be losing its spending power against the rate of inflation, you may be wondering where else you can hold your money.

Historic data paints an interesting picture here, showing that while cash savings can outperform inflation in the long term, investing your money can produce even better results.

Focusing on the 20-year period from January 2002 to December 2022, the BoE’s inflation calculator shows that inflation averaged 2.5% a year. So, goods and services that would have cost £10,000 in 2002 would now cost £16,333.74 in 2022.

Now consider data from Barclays Smart Investor looking at the performance of cash and investments. It shows that £10,000 in cash in January 2002 would have returned £17,763 by 31 December 2022, measured by the JP Morgan Cash Index United Kingdom.

Yet crucially, the data also reveals how investing can be even more powerful for generating a return over the long term. Across the same time period with £10,000, the data suggests that you would have had:


  • £24,381 from investing in UK large cap shares, represented by the FTSE 100
  • £27,509 from a range of UK shares, represented by the FTSE All-Share
  • £37,344 if you had invested in global developed market shares, represented by the MSCI World Index.


From this, you can see that invested money in equities has historically outperformed both cash and the rate of inflation.

While past performance is not necessarily an indicator of future performance, this is why we’d typically recommend keeping cash accessible in an instant access account, and investing other wealth to generate a higher return.

Speak to us

If you’d like to find out more about managing your money as interest rates fluctuate, we can help at Cordiner Wealth.

Email hello@cordinerwealth.co.uk or call 0113 262 1242 to get in touch with us today.

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.