Good luck to you if you’re looking for a return on savings

Business banking news review: week ending 11 Apr 2013

If you’re looking for a way to grow your savings pots in the current economy, good luck to you: banks and building societies are slashing rates left and right!

In fact, fixed rate bonds – once one of the best ways to save for the future since you’re locking away your money for a fixed period of time – are being scaled back by several major banking providers. Just this past week, both Santander and Halifax slashed the interest rates it offers to new savers on a wide selection of their bonds; the one-year fix offered by both banks is now an almost insulting 1.75 per cent before tax (1.4 per cent after).

It’s not just one-year fixes that felt the swing of the ax either, as Halifax’s two-year fix is now only 2.1 per cent before taxes (1.68 per cent afterwards). Santander’s offering is even more abysmal, as it now ‘boasts’ a 1.9 per cent before tax rate of return (or 1.52 per cent after the basic tax rate).

Of course, things aren’t terrible for some luck savers who happened to stumble across the Online Bonus ISA from Leeds Building Society, as it was launched last weekend and not only accepts transfer in but also has a lovely 2.55 per cent tax free interest rate. Of course, unless you found out about the new deal late, in which you missed out; that’s right, Leeds BS took down its offering only after a few short hours!

Is it any wonder that savers flocked to this offering so quickly? I don’t know about you, but most of us are simply starved for savings products that actually make your money work for you. It’s absolutely frustrating to spend hours of your time looking for a good deal only to find that there truly aren’t any, especially considering that inflation is so high that you’d be hard-pressed to actually find a savings product that can leave you with more money than you started with after a year when taking both the rising cost of living and the generous cut the taxman takes out!

Savings providers in the UK have been letting the side down for years when it comes to proper interest rates on savings products, and blimey if I’m not sick and tired of it. Things were bad even before the Government’s Funding for Lending scheme burst on to the scene last year, but now that banks can access cut-rate wholesale funds from the Treasury in exchange for dropping the rates on their mortgages and business loans, they have even less motivation to drive savings deposits than they did in the days after the credit crisis – and the UK’s savers are suffering for it!

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