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Dave Beans

Savers Lose Out On £60Bn In Interest: Figure Revealed As Base Rate Stays At Record Low

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http://www.dailymail.co.uk/news/article-1346778/Savers-lose-60bn-Figure-revealed-base-rate-stays-record-low.html

Savers have lost out on interest worth almost £60billion since the Bank of England cut the base rate to its historic low, ­exclusive research reveals today.

Cash-strapped savers have been the victims of the Bank’s attempts to ­rescue the country’s economy, ­penalised by rates of close to zero. Yesterday the Bank held rates at 0.5 per cent for the 22nd consecutive month, the longest period of unchanged rates since the aftermath of the Second World War. The rate is the lowest since the Bank was founded in 1694.

For savers, who outnumber borrowers by a ratio of seven accounts to one, the impact has been devastating. In those 22 months, the average variable savings rate has been just 0.77 per cent. With a total savings balance of £1,140billion and taking into account compound interest, this is equal to ­interest of just £16billion.

During the previous 22-month period, the average variable savings rate was 3.41 per cent. Based on the same savings total, this would have brought interest of around £74billion, according to the financial ­information firm Moneyfacts.

The gap between the two ­figures is £58billion, which would be in savers’ pockets if the rate had not been slashed. Michelle Slade, a savings expert from Moneyfacts, said: ‘Prudent savers have lost out on a fortune in interest. They are being paid a paltry amount of interest on their money.

‘Savers have suffered being paid some of the lowest rates of interest ever seen. For them, a base rate rise cannot come soon enough.’

Loyal savers who have not moved their nest egg for years are among the worst hit, with rates of less than 0.1 per cent. Banks and building societies lure new savers with their best rates, but let those paid to loyal savers fall fast to rock-bottom levels.

Jason Riddle, of action group Save Our Savers, said: ‘While interest rates have scraped along at rock bottom, making life a misery for those who rely on their savings for income, inflation has been allowed to rise way past its target, eating away at the value of people’s savings.’

THREAT OF DOUBLE DIP 'IS GROWING'

The threat of a double-dip recession has intensified since George Osborne outlined his deficit-busting austerity drive, a gloomy report warns. There is now a one in five chance of a second economic downturn, according to the Centre for Economics and Business Research. The CEBR expects economic growth of 1.1 per cent in 2011, down from the 1.3 per cent it forecast in October. This is well below the 2.1 per cent expected by the Treasury, which outlined £81billion of cuts in October.

Charles Davis of CEBR said: ‘This year is probably going to be the toughest year in the next economic cycle.’ But in a boost to the Chancellor, finance experts Moody’s said the action taken to tackle the country’s debts meant ­Britain’s AAA credit score was now safe. But good news for savers may still be a long way off. Roger Bootle, economic adviser to the accountants Deloitte, said: ‘Interest rates will be at 1 per cent or below for years to come.’

To make matters worse, inflation– currently 3.3 per cent – is rising but the majority of annuities, which pay a monthly income for life to pensioners, do not increase with inflation. Dr Ros Altmann, of old-age services group Saga, said the situation had ‘devastating ­consequences’ for pensioners, who were being ‘sacrificed’ to Government economic policy.The winners are the two-thirds of Britain’s 11.3million homeowners who have a variable rate mortgage, whose monthly repayments have fallen since March 2009.

If rates increase, 2.7million of these homeowners would struggle if their mortgage repayments went up by more than £100 a month, according to insurance firm MarketGuard. Only one member of the Bank’s interest-rate setting committee, Andrew Sentance, has been voting for rates to rise. Since June, he has voted every month for the rate to go up to 0.75 per cent.

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I haven't lost any money, I gained nearly 20% per year on my savings for the last 2 years. Then again I opted out of their corrupt system and I recommend everyone else does the same before it implodes.

Yes me too. Its sure feels good to have opted out, and know that they cant use my wealth for their corruption.

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This is a phenomenon across the developed world. There is too much savings chasing too little opportunity.

If you go back to say the 1970's there was real competition for savings. One group might want to build a power plant where there is companies crying out for more power.. and another group might want to build a series of shopping center, where there is no shopping centers in those local area. But there is only enough money to fund one group. So which group pays the highest interest gets the deal.

Today we have a surplus of nearly everything regarding capital.. but lots and lots of savings out there. So the net result must be, ultra low interest rates. Its just supply and demand.

This could change down the road, but its not likely to change anytime soon. Right now most western countries are outright against expansion of their economies for green reasons. Just try to get approval to build one of the few things there is demand for like a housing development.

This is part of the reason why I do not think we'll ever see 1% base rates again.

Edited by aa3

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This is a phenomenon across the developed world. There is too much savings chasing too little opportunity.

If you go back to say the 1970's there was real competition for savings. One group might want to build a power plant where there is companies crying out for more power.. and another group might want to build a series of shopping center, where there is no shopping centers in those local area. But there is only enough money to fund one group. So which group pays the highest interest gets the deal.

Today we have a surplus of nearly everything regarding capital.. but lots and lots of savings out there. So the net result must be, ultra low interest rates. Its just supply and demand.

This could change down the road, but its not likely to change anytime soon. Right now most western countries are outright against expansion of their economies for green reasons. Just try to get approval to build one of the few things there is demand for like a housing development.

This is part of the reason why I do not think we'll ever see 1% base rates again.

Good post. Not only the above, but if those borrowers defaulted, as a result of a rates rise, the banks would be in trouble again and therefore savings would be at risk.

The only advice I would offer is to get out of cash. The returns on alternatives may be more risky, but it seems like cash is a guaranteed loss.

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Good post. Not only the above, but if those borrowers defaulted, as a result of a rates rise, the banks would be in trouble again and therefore savings would be at risk.

The only advice I would offer is to get out of cash. The returns on alternatives may be more risky, but it seems like cash is a guaranteed loss.

Yes good point, at some point you haveto take the leap of faith and buy assets. And if one truly thinks the UK system will come down, then best to get the money out of the country. If one thinks there is going to be upheavel but light at the end of the tunnel then buy assets.

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Gives you an idea of how much the banks have charged people in interest (since deposits and saving are lent out by bank at a much higher rate than they pay in interest.

I don't think bank are making as much as you think. If my ZOPA experience is any thing to go by 60% of the interest earned is going to cover bad debt.

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This is a phenomenon across the developed world. There is too much savings chasing too little opportunity.

If you go back to say the 1970's there was real competition for savings. One group might want to build a power plant where there is companies crying out for more power.. and another group might want to build a series of shopping center, where there is no shopping centers in those local area. But there is only enough money to fund one group. So which group pays the highest interest gets the deal.

Today we have a surplus of nearly everything regarding capital.. but lots and lots of savings out there. So the net result must be, ultra low interest rates. Its just supply and demand.

This could change down the road, but its not likely to change anytime soon. Right now most western countries are outright against expansion of their economies for green reasons. Just try to get approval to build one of the few things there is demand for like a housing development.

This is part of the reason why I do not think we'll ever see 1% base rates again.

Yes good post.

one thing I find on HPC is a lot of the posters just keep saying things like.

Mervin King is a w****ker

Mervin King is a Idiot

Clearly he is not a idiot. The posters need to spend more time asking themselves where they have gone wrong other wise they will learn nothing.

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This is a phenomenon across the developed world. There is too much savings chasing too little opportunity.

If you go back to say the 1970's there was real competition for savings. One group might want to build a power plant where there is companies crying out for more power.. and another group might want to build a series of shopping center, where there is no shopping centers in those local area. But there is only enough money to fund one group. So which group pays the highest interest gets the deal.

Today we have a surplus of nearly everything regarding capital.. but lots and lots of savings out there. So the net result must be, ultra low interest rates. Its just supply and demand.

This could change down the road, but its not likely to change anytime soon. Right now most western countries are outright against expansion of their economies for green reasons. Just try to get approval to build one of the few things there is demand for like a housing development.

This is part of the reason why I do not think we'll ever see 1% base rates again.

Don't we need a few new power stations?

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Yes good point, at some point you haveto take the leap of faith and buy assets. And if one truly thinks the UK system will come down, then best to get the money out of the country. If one thinks there is going to be upheavel but light at the end of the tunnel then buy assets.

nice exchange, have to agree. The vast majority of my 'wealth' (not exactly Donald Trump mind..) is outside the UK and will remain so long as the interest-rate situation remains the same.

The article is great bear-food, a figure like £60Bn ought to start raising heckles.

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This is a phenomenon across the developed world. There is too much savings chasing too little opportunity.

Good grief - if there's one problem our economy doesn't suffer from, it's 'too much savings' .... :rolleyes:

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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