For the coming year, the nation’s savers are waiting with bated breath for the Bank of England to raise its base interest rate from its historic 0.5 per cent low in order to start growing their savings pots once more.
When the BoE’s Monetary Policy Committee decided in March of 2009 to set the base rate to its current level, savings accounts crashed as personal and business bank account providers adjusted their rates downwards to match. This has made the majority of the past year quite trying for savers looking to find best buys that could reward their good sense by saving for the future, especially in light of eye-watering inflation rates that seemed to go up and up.
The cost of living is rocketing ever higher, according to official statistics, and while the Consumer Prices Index has receded slightly over the past month or so, it still rests at 4.8 per cent – more than double the Bank of England’s target of 2 per cent. In order to actually make any gains from their savings accounts, Brits would need to find an offering that pays a minimum of 6 per cent – or 8 per cent if they’re higher tax rate payers – and the industry simply has none available.
This means that the value of savings account balances in the UK is eroding over time. The bad news is that the base rate is most likely going to remain at its historic low for an additional 12 months, with only 1 out of three economic experts asked by the Treasury predicting an increase in 2012.
Rates need to remain low in order to encourage economic recovery, says Sir Mervyn King, governor for the Bank of England. While the economy did grow by 0.6 per cent in Q3 2011, this coming year will not be smooth sailing by any account, especially because of the brewing eurozone crisis storm that could very well turn into a massive problem.
