Savers miss out on £100billion in interest in four years thanks to slashing of interest rates
- Interest rates were slashed in 2009 to their lowest ever since 1694
- Savers have been hurt by lower rates but mortgage payers have benefitted
In 2009 the base rate was cut to 0.5 per cent, the lowest level since it was founded in 1694
Savers have missed out on more than £100billion of interest since the Bank of England slashed the base rate to its lowest level in history, a report reveals today.
On the fourth anniversary of the controversial policy, the study lays bare the crippling impact on savers, including millions of pensioners and hard-working families.
Experts warn that Britain’s long-established culture of savings is being ‘destroyed’ by a strategy designed to make borrowing easier, which has punished savers with the worst interest rates in history.
It was on March 5, 2009, that the Bank cut the base rate to 0.5 per cent, the lowest level since it was founded in 1694.
It has been frozen ever since. And two senior Bank officials this week raised the prospect of ‘negative interest rates’, a suggestion greeted with disbelief and fury by savings campaigners.
The report by the campaign group Save Our Savers said the average interest rate on all types of savings over the last four years has been just 1.27 per cent.
But in the four years before March 2009 the average rate was 3.57 per cent.
The amount of ‘lost interest’ is £101.7billion – the difference between the amount of interest they have received and the amount they would have received in the last four years if rates had not plunged.
Simon Rose, from Save Our Savers, said: ‘These numbers show the breathtaking scale of the theft of the nation’s savings, which is getting even worse.
‘Prudent savers, who have put money by, often for their retirement, are having the rug pulled out from under them.
‘Every day we hear from people who rely on their savings who are in despair at their increasingly precarious situation.
‘There has been an appalling human cost as a result of the Bank of England’s policies.’
Banking giants have cut interest rates as low as 0.05 per cent, dangerously close to zero, a devastating blow for pensioners who used to rely on the income from their nest eggs to survive.
MY PRUDENCE IS PENALISED
Before rates started to collapse at the end of 2008, Kate Williams was earning up to £36 a month in interest on her tax-free, £9,000 cash Isas with a major bank.
Suddenly, it almost disappeared. In April 2009, a month after the Bank cut the base rate to 0.5 per cent, it fell to £1.62.
When she called her bank to complain, she was ignored until she threatened to move her money elsewhere.
Her interest payments have since been increased to £20 a month.
The 31-year-old has been prudently saving money for years to fulfil her dream of buying a family home with her fiancé, Matthew Tumbridge.
Miss Williams, who works for the charity Ambitious About Autism, said: ‘There will be a generation of people like me who don’t own their home and don’t have a pension.
What is going to happen when we get old?’
Miss Williams and Mr Tumbridge, 31, are renting in North London.
But they want to buy and need savings for a deposit, with the average amount in the capital standing at £60,000.
She said: ‘It drives me mad the Government is not doing more to help those who have saved to get on the housing ladder.’
The high cost of living is making life worse, with the spending power of their savings destroyed by high inflation, which has been above the Government’s two per cent target for several years.
Dr Ros Altmann, a former Government policy adviser and independent economist, said: ‘The savings culture that we used to have in Britain is being destroyed.
‘Young people think that it is simply not worth bothering.’ Savings rates have fallen even more dramatically since August, with experts blaming the latest attempts by the Government and the Bank to kick-start the economy.
Under the £80billion Funding For Lending scheme, banks can borrow an unlimited amount of money very cheaply, which means they no longer need to attract savers’ money with generous interest rates.
Sylvia Waycot, from the financial information firm Moneyfacts, said: ‘It has been four long, miserable years for savers since the base rate fell to its current historic low.
‘In that time, savers seem to have been largely forgotten.’
Meanwhile, for millions of homeowners with variable mortgages, the last few years have delivered an unexpected financial windfall.
Their monthly repayments have plunged as rates have fallen, with many paying just half what they used to every month, saving them a fortune.
Last night, a Bank spokesman said: ‘Low interest rates have helped to support the economy, preventing sharper rises in unemployment and in business failures.
‘Ultimately supporting economic recovery is in everyone’s interest.’ Earlier this week, Charlie Bean, the Bank’s deputy governor, said: ‘We want to get [interest rates] back to more normal territory, but we can only do that when the economy is in a better position.’
Most watched News videos
- Mysterious condition causes woman's breasts to grow uncontrollably
- Tory leadership debate: Boris challenged over Nazanin comments
- All together! NYC commuters sing Backstreet Boys in subway car
- Emily Maitlis attempts to stop Tory MPs talking on BBC debate
- Trump says 'this country will not stand for that' in Oval office
- Sajid Javid eliminated from Conservative Leadership race
- Rory Stewart 'the only one finding a key' to Parliament door
- Playful pup peaks past curtains for some piquant popcorn
- Royal Ascot revellers shows off their looks on Ladies' Day
- Merchants tie woman to pole and set her feet on fire for stealing
- Incredible moment detective tackles man during press conference
- Rory Stewart sits on the edge of his seat in BBC TV debate