Although the bulk of my savings are tied up in the stock market, I’ve been hit by the change in the base rate – but other factors, such as the fall in the pound and the subsequent rise in the stock market, have at least offset some of the pain.
The main thing is my current account with Santander. While banks have been cutting savings accounts constantly over the years, the Santander 123 account paid me 3% on up to £20,000. In November this was cut to 1.5%, which is better than most accounts, but I am still facing a loss in income. Thank goodness for the 65 Plus account that the Government offered up a couple of years ago, which is still paying me much, much more.
The good news is that the battle for a decent rate on my savings is not affecting my income. I’m fortunate to have good pension income, but my secret weapon is the dividends I receive from my BT shares. Even if I don’t need the money right now, they provide me with a healthy source of additional savings.
Just before the cut in the base rate, I bought 3,500 Lloyds shares at a low price of 50p; bringing my total holding in the bank up to 10,000 shares. I had read that the bank was hoping to pay a fair dividend over the next few years so I expect them to rise and am planning to sell them once they reach my target price of 80p. I’m holding tight on further investment opportunities at the moment – my portfolio is currently bringing me over £5,000 a year in dividends.
I’m not holding out much hope for a rise in interest rates. I do expect a rough two or three years while the government tries to sort out Brexit, but I do feel that the economy will pick up after that. As long as we are able to get a fair Brexit deal, and we set up trading policies with countries outside the EU, we will then start to see the state of our economy pick up and then rise in the interest rates.
Until, then I’m scanning the horizon to see what’s available. I’m currently taking a long look at peer to peer lending, which pays higher rates than savings accounts. But as always with my investments, I’m waiting for it to be available in an ISA. And even then, I’m cautious about investing too much in it – it’s just another asset in my diverse portfolio.