Nationwide has announced it is raising interest rates across its savings accounts, including hiking one to 5%.
The decision comes after a Bank of England policymaker said interest rates may have to rise to 2% or higher in the next year to rein in rocketing inflation. Outgoing Monetary Policy Committee (MPC) member Michael Saunders - who has been recently outvoted in calling for a bigger hike in rates - said increases "still have some way to go" in order to get inflation under control.
In a speech at the Resolution Foundation think tank, he warned that, despite signs of a slowdown in the wider economy amid the cost-of-living crisis, the risks of not raising rates steeply and quickly outweighed those of being too cautious.
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Interest rates have been raised to 1.25% from 0.1% since last December, but Mr Saunders voted for an increase to 1.5% at the meeting in June and has called for a 0.5 percentage point rise in rates at each of the last two MPC decisions.
According to the Express, Nationwide has raised the introductory credit interest rate on its FlexDirect current account to 5%. This move by the building society is estimated to assist members by up to £200 within a year if they switch over to their services.
People who choose to switch to Nationwide’s FlexDirect will also benefit from the financial institution’s switching incentive. This deal gives £125 to existing members who switch their current account to the building society and £100 to new customers.
Debbie Crosbie, the building society’s chief executive, shared why interest rates are raised to this extent amid the cost of living crisis. Ms Crosbie said: “Being able to offer highly competitive rates is one of the biggest benefits of mutuality.
"This market leading rate will help new and existing members make the most of their money, which is particularly important right now.
"The FlexDirect current account also has an introductory interest-free overdraft to give some peace of mind to those struggling financially and freeing them to focus on repaying other debts.”
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