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15 Oct 2019

Go Direct Personal Finance News  2009

Numbing effect of savings interest

It is hardly surprising that we have all become numb to the plight of interest on savings accounts. Everyone knows how miserably low they are.
 
In monetary terms, just how bad has it got?  It’s hard to imagine that only five years ago, Bank of England (BoE) base rate was 5.75%. The average no notice account paid 4.08% and to raise £100 in gross interest would have required a deposit of £2,451. Notice accounts paid an average of 4.23%, and to get the same return would have meant investing slightly less at £2,364.

How things have changed. BoE base rate has been at its historic low of 0.50% since March 2009 and today’s average notice account pays just 1.17%, and would require an investment of £8,547 to raise just £100 gross interest. The average no notice account pays a paltry 0.90%, putting £100 interest out of reach unless you have £11,111 invested.

 

Aug-07

Aug-12

Average no notice account

4.08%

0.90%

Average  notice account

4.23%

1.17%

BoE base rate

5.75%

0.50%

Source: Moneyfacts.co.uk

    
Sylvia Waycot, finance expert for Moneyfacts.co.uk, said:

“To get the same return on investments as five years ago, you need to find an additional whopping £8,660 to put into an instance access account.

“Looking purely at averages, today you couldn’t even put your cash into a five-year bond and get the return of an instant access account five years ago, as they are currently averaging only 3.79%.

“This highlights the heartbreak currently facing pensioners trying to supplement incomes and also potential first time buyers who are desperately trying to save for deposits.

“The Bank of England is due to announce its base rate next week, and talk is once again suggesting a possible cut. If this should happen, where will it leave savings rates?         
 

“Yet another fall in returns may not signal the end of the world for savers, but as the saying goes, ‘you will certainly be able to see!’.”

Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.

 

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