Consumers withdrawing billions due to poor returns on savings
A recently released report has claimed that consumers in the UK have been withdrawing billions of pounds worth of savings over the first couple of months of this year, and this is because of the paltry rates of interest now being paid on many instant access and notice accounts following the dramatic cut in interest rates over the past six months. It has been revealed that in many cases savers are receiving barely above zero in terms of interest on these accounts.
In January savers are said to have taken out over two billion pounds in savings between them, and with the interest rate having been cut twice since then it is likely that the situation will get worse, reducing deposits into banks and building societies and further impacting upon the finances available to lenders to fund their lending operations.
The base interest rate has plummeted to just 0.5 percent now, which is its lowest level since the Bank of England was founded over three hundred years ago.
One industry official said that he wasn’t surprised at the level of money that was being withdrawn by worried and angry consumers, and he stated: ‘They are looking at the returns they are getting and thinking they are diabolical. There was a big shift in January, and February is running on a par with January. There is also nervousness about the banking system, so people are withdrawing cash.’
Pensioners have been badly affected by the savings rate cuts, as many relied on the interest earned on their life savings to fund their day to day living. One pensioner said: ‘I feel my generation has been abandoned. I really worry how some of my friends are going to survive.’