Low Interest Rates Damaging Savings
The base rate of interest in the UK, as set by the Bank of England, has now been at the historically low level of just 0.5per cent for a total of 28 months and shows little sign of increasing in the foreseeable future.
Of course, this is great news for those people who are making repayments on variable rate home owner loans, or are looking to borrow money, as there are plenty of cheap loan deals available on the market to choose from. It is even possible at the moment, to get an unsecured loan with an interest rate of less than 10 per cent, for a credit worthy borrower.
However, the low interest rates have also been passed on to savers as well as those with loans and many people have seen the value of their savings being eroded, due to low interest rates and high levels of inflation.
It is estimated that low interest rates have eroded somewhere in the region of £50 billion from the overall value of savings in the UK and a group calling themselves “Save our Savers” has written to the Bank of England’s Monetary Policy Committee (MPC), asking them to increase interest rates for the sake of their savings.
The group said “Inflation has reduced the real value of the nation’s cash savings by more than £50 billion over the past twelve months. Savers and those on fixed income, such as pensioners, are suffering terribly from the combination of extremely low interest rates and above target inflation.”
Other individuals are also withdrawing their savings in order to repay their loan debts, which charge a higher rate of interest than they are receiving on their savings, or to help their children and grandchildren repay their own loans sooner than they would otherwise be able to do.
