Savings rates hit record lows

by Gill Montia

Story link: Savings rates hit record lows

New figures from the Bank of England show that in December, interest rates on various savings accounts fell to their lowest levels since the Bank’s records began in 1995.

According to the report, the average return on a no-notice account stood at 0.81%, while the average rate on a cash Instant Savings Account (ISA) fell to 3.02% and fixed-rate bonds were down to an average 2.09%.

By way of comparison, figures from financial data provider, Moneyfacts, show that in the early part of 2008 average rates were as follows: instant access 2.19%; no-notice 2.99%; cash ISA 4.56% and fixed-rate bonds 5.32%.

Returns will have already deteriorated further because savings providers are still taking into account December’s 1% and January’s 0.5% cut in the base rate.

Savers have been hard hit by aggressive cuts in the base rate since October, prompting a political debate over help for those reliant on income from their deposits, such as pensioners.

Prime Minister Gordon Brown has indicated that help will be forthcoming in April’s budget, most likely in the form of tax cuts.

However, with further reductions in the base rate on the cards the outlook for savers remains bleak and tax breaks could become worthless as rates head towards zero.