Savers disappointed by low returns

Since October of last year the base interest rate in the UK has plunged from 5 percent to just 1 percent, which has come as a blessing for many borrowers who were struggling to keep up with rising borrowing costs, such as mortgage repayments.

However, another group that has been affected by the plunging interest rates is savers, and this is a group that has not benefited from the interest rate cuts, but has instead seen the level of returns that they receive on their savings plunge to record lows.

A recent report has suggested that the rates paid on some common savings accounts have now fallen to record lows, with accounts such as instant access savings accounts, notice accounts, bonds, and tax free ISAs being affected by the rapid and dramatic drop in interest rates. The rates on some of these accounts are now at the lowest since records began according to the report, and this means that many savers are receiving paltry returns on their hard earned savings.

The Building Societies Association has recently expressed concern that this situation could result in fewer people putting their money into savings accounts, and this would mean that lenders have reduced access to deposits, which could seriously affect their access to funds to finance their mortgage lending operations. For example, the average interest rate paid on instant access accounts has now plunged to 0.51 percent from 0.81 percent in December.

The recent data does not reflect the most recent interest rate cut from February, where the base interest rate was cut from 1.5 percent to just 1 percent. Some industry officials have expressed concern that the most recent rate cuts have done little to help borrowers and have resulted in savers being penalised.