For the ‘lucky few’ who have money in the bank, interest rates hit all time lows

March 10th, 2009 by admin | Filed under Daily News, Pensions, Saving, Savings Accounts, UK Bank Accounts, savings accounts.

In a time where just about anything is possible in the banking World, there might even be a scenario unfolding where banks will begin to charge their customers a storage fee for keeping their money on deposit. Sounds unlikely? It might well be, but with experts predicting that interest rates on savings account may fall by around a quarter of a percent in the wake of last week’s treasury decision to cut the base rate to a half a percent then the prospects of interest rates on short term deposit accounts could hit that big round zero figure, with the question of what comes after that!

Among the latest line of depressing statistical releases from the Bank of England was one that announced that the external liabilities of UK banks fell by a massive three quarters of a trillion pounds in the last nine months of 2008, representing the largest ever withdrawal of foreign funds in recent decades

And who can blame the depositor for looking somewhere else to take of their money? With concerns that the UK is no longer the safe place that it was to hold funds, under the considerable and ever-growing uncertainty of the banking crisis, along with almost inevitable shift towards financial protectionism internationally, it seems almost logical.

There is no escaping the fact that the average rate paid out by British Banks for an instant access account sat at 0.17% at the end of February, before the last rate cut. While the low interest rates charged by the banks and building societies may well suit those who are sitting on heavy mortgages, it will certainly not suit those who have been saving hard all of their lives, and have accumulated a small next egg, where they hoped or even assumed that the interest earned would go a long way to supplement their pension. Even 2008, not a great year for savers by anyone’s standards, but at least the banks were paying out 2.69% interest on savings accounts. An indication on the slide in interest rates is that in January 2008 banks were paying out 5.06% on savings accounts.

The feeling amongst savers is that they are being punished to meet the costs of mistakes made by banking management.

The only ray of light in a distinctly black picture for savers is that general acknowledgment that rates have gone as low as they are ever likely to, and form here the only way is up for savers. An interesting fact revealed by the Bank of England in their recent survey was that, despite the doom and gloom of recession there are household savings currently being held by banks an building societies of just over one thousand billion pounds, a considerable sum by any ones terms, but not so, when you consider that the banks are currently owed one and one quarter billion.

The question would have to be that, in the light of this information and the very low return on their investments, if the Great British saver could find a safer and more magnanimous place to house their savings, would they?