The campaign group, Save Our Savers claims that savers in the UK are losing £44.5 billion because of the gap between inflation and Bank Base Rate, which after this week’s decision by the Bank of England, continues to be at an all time low of 0.5%.
Mortgage holders and savers
Whilst mortgage holders might welcome the news that interest rates will remain at all time lows for at least another month, and probably far longer, savers continue to lose out. Not only is Bank Base Rate low but even the best savings interest rates are struggling to keep pace with inflation, meaning that savers are losing out in real terms.
Unfair on savers
Spokesman for Save Our Savers, Simon Rose, said: “It is unfair to confiscate £44.5 billion annually from savers and pensioners and transfer it to those in debt; to penalise those who have struggled to put something by in order to support those who ran up debts and caused this financial crisis; to reward debt and penalise savings.”
Interest rates on fixed rate bonds rise
A silver lining has though been provided to savers as the average rate for five year fixed rate bonds has hit its highest level since July 2011.
Interest rates on five year fixed rate bonds rose gradually at the end of last year and are now at six month highs. However, experts warn that savers tempted by these rates should be careful of lock ins and penalties, should they decide to withdraw money from the fixed rate bond before the end of the five year term. Savers should also be careful of fixed rate bonds which allow no early access and could leave savers stranded on uncompetitive rates if interest rates rise in the future.