Hard-pressed savers are today being urged to shop around as interest rates continue to plummet to record lows.
In April last year the Bank of England base rate stood at 5%. But following four consecutive months of interest rates cuts, it now stands at just 1.5%.
The Bank’s Monetary Policy Committee is due to meet next month and some economists anticipate a further reduction as the UK slips into recession.
Last Friday’s Bank of England interest rate cut of 0.5% is a major blow for savers who have seen the value of their annual windfalls spiral downward.
Northern Bank chief economist Angela McGowan said: “The Bank of England’s latest move is designed to discourage savers from hoarding cash at a time when the economy requires a spending boost. Although savers may be concerned about the loss of interest on their deposit accounts they should take some comfort from the fact diminished income from savings accounts will be partially offset by falling prices within the economy.”
There are fears that the savings slump will impact particularly hard on the elderly.
Age Sector Platform, which represents the rights of older people in Northern Ireland, has voiced concern about the adverse effect the latest 0.5% interest rate cut will have on pensioners.
A spokesperson said: “This further cut in the interest rate will have a detrimental effect on the lives of many older people in Northern Ireland. Older savers will now be penalised for their forward thinking.
“We have found, as part of the Age Sector’s Can’t Heat or Eat campaign, that many older people are currently relying on their limited savings in order to make ends meet. Therefore, any reduction in interest will affect their ability to pay high household bills.
“Furthermore, the savings which they believed would prevent them from struggling through their later years also disqualify them from receiving several benefit entitlements. This represents a ‘lose-lose’ situation for many older people.”
Siobhan Harding from Citizens Advice Bureau called on savers to shop around to ensure they secure the best deal. She said: “With savings rates continuing to fall this is impacting on savers, particularly the elderly, who were relying on the interest on their savings to make ends meet.
“There are a number of different savings products on the market each offering varying rates of interest so it pays to shop around. As with any financial product, either for borrowing or saving, the best advice is to shop around for the best deal possible.
“It can be easy to do nothing and just leave your money where it is or not to do your research and open a savings account which offers minimal returns.
“However if you shop around the products on offer you may be able to get a better deal. If you do find an account with a reasonable rate it may be advisable to act quickly to safeguard the deal as it may not be around for long.”\[Brian Lovett\]Michelle Slade, an analyst at Moneyfacts.co.uk, said: “The figures are no great surprise. Rates have been coming down quite dramatically in the last four months.”
This proved that savers were being penalised and struggling to find accounts that paid good returns, he said.</>