New data published by Flagstone and Flagstone International, it’s international counterpart, shows that the proportion of financial advisers and savings professionals at banks who believe the base rate will be cut at the next Monetary Policy Committee has jumped to just over half.
However, they remain cautious about significant cuts, with 82% not expecting the base rate to drop below 4.5% by the end of the year.
Confidence in a rate cut increases among savings professionals and advisers, but is still divided
The Flagstone Base Rate Poll surveyed 136 independent financial advisers, wealth managers, and senior savings professionals at banks and building societies in the UK and internationally. The survey found that 52% of respondents expect the base rate to be cut from 5.25% in August, marking a significant shift in opinion from the last poll in June, when 30% anticipated a cut. Ahead of the 9 May MPC decision, less than a fifth (18%) of respondents predicted a cut.
Despite this shift, savings professionals and advisers are largely split on their predictions. 14% are not expecting a cut at all in August or September.
Competition to increase among banks
When asked what a base rate cut in August or September would mean for cash deposit rates by the end of the year, a quarter (23%) believe competition among banks will increase to win instant access and shorter-term funds. 21% believe the spread between the most and least competitive rates will narrow.
Three-fifths (59%) of respondents believe cash deposit rates will fall moderately (25 to 50 basis points) between now and the year-end, while a third predict rates will only drop by up to 25 basis points.
Act now to lock in the best cash deposit rates
59% of savings professionals and advisers suggest locking in the best longer-term rates for cash not needed immediately. 48% suggest spreading their cash deposits across savings accounts with different term lengths.
Andrew Thatcher, CEO of Flagstone International, commented: “There is still a great deal of uncertainty around the UK’s economic prospects in the short, medium and long-term. Therefore, it’s unsurprising that just only half of the respondents to our poll are confident of a rate cut in August. Recent UK services sector data seems to confirm concerns that the fire of inflation is still not fully doused and the country remains on a low-growth trajectory as it stands.
“In that context, it does seem inevitable that Bank of England base rate will need to come down soon to help kickstart that much needed economic growth. It also is highly likely that trend will continue among central banks in some of the most influential global economies the major economies. Most notably, the ECB and the Fed are also expected to keep trimming their rates as we head toward the end of this year.
“In that context, for those that hold GBP denominated cash assets on behalf of their clients it may be wise to look to secure the best possible rates for cash deposits now before they start to tail off or look to other jurisdictions to continue driving above inflation growth over a longer-time period.”
