desert with wet place on itAs if savers needed any confirmation, new research has shown that interest rates are still falling. What’s more, there is no end in sight to the drought, which has seen hard pressed savers endure an unprecedented period of low interest rates.

New research from Moneyfacts, shows that over the past 18 months’, savers have seen 883 cuts to interest rates on all savings account, compared to just 188 rises.

The one bit of good news for savers is that inflation remains relatively low; 1.3% (Retail Price Index) or 0.3% (Consumer Prices Index) depending on the measure you wish to use.

However, it wouldn’t take much, especially if the cost of petrol starts to rise again, for inflation to rise above the rate of interest paid on savings accounts, resulting in a net loss to savers.

Why are savings rates so poor?

There are a number of reasons.

Firstly, the Bank of England has kept base rate at 0.5% for well over seven years now and shows no sign of increasing rates.

Secondly, following a series of high profile mergers, there is now significantly less competition amongst banks and building societies. Over recent years this has problem has been made worse by the Government’s Funding for Lending scheme, which opened up a cheap source of finance to banks and building societies.

Finally, with the introduction of the Personal Savings Allowance, many savers will no longer pay tax on their interest, meaning that rates can be cut without an immediate impact on the net return savers receive.

This final reason is in some part evidenced by the fact that pace of rate cuts increased in February to their fastest level on record.

Where can you get the best savings interest rates?

The rates of interest paid to savers vary depending on a number of factors, including:

  • The length of time you are prepared to tie up your capital
  • Whether or not you are prepared to use the top paying account, or you prefer to settle for a lower rate, but use a bank or building society which is a more well recognised ‘high-street’ name
  • Whether or not you want to use a Cash ISA (Individual Savings Account) or a ‘traditional’ savings account

The requirements of each saver are different and the interest rate, counterintuitively, often isn’t the most important factor. We therefore believe there is often little merit in saying that one account is better than the other.

Having said that, where can you find the best interest rates? By clicking here.

We’re here to help

If you are a beleaguered saver, looking for the best home for your money, or an alternative to traditional savings accounts or Cash ISAs, we are here to help.

Call Sarah or Bev today on 0115 933 8433, alternatively, email info@investmentsense.co.uk

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