Fresh low for savings interest rates

Figures that were recently released by the Bank of England have shown that savings rates on many accounts in the UK have now sunk to a fresh low following the series of dramatic base rate cuts that have been applied over recent months. The figures indicated that the rate of interest paid to savers that wanted to have instant access to their cash was only slightly above zero.

Whilst the base rate cuts, which took place between October and March sending the base rate plummeting from 5% to just 0.5%, came as welcome news for many borrowers who saw their repayments drop the news has been bad for savers, many of whom rely on the interest on their savings as a form of income. However, at the end of the February the average rate of interest paid on instant access accounts was just 0.17% according to the figures from the central bank.

The data also does not take into account the latest base rate cut of 0.5%, which came after the March Monetary Policy Committee meeting, so the situation could become increasingly bleak. The average rate of interest paid to those with notice accounts is also very poor, and at the end of February was at just half the level of a month earlier, standing at an average 0.18%.

One industry expert said that savers were being punished for mistakes that had been made by others, and that many were desperately trying to find alternatives for their savings that could help them to enjoy higher returns. He added that this showed just how badly savers were being affected, as under normal circumstances safety and security of savings would be paramount to consumers in the current financial and economic climate.

A number of industry groups are also concerned about the ongoing interest rate cuts, including the Building Societies Association. The BSA has stated on a number of occasions that the low level of the base rate means that savers are now less likely to put their cash into savings accounts due to the low returns, and this in turn reduces lenders’ access to funds for their mortgage lending operations.