Economists warn interest rates to remain rock bottom

Economists have recently warned that interest rates will most likely remain at rock bottom well into 2013.

The base rate, which has stood at an historic 0.5 per cent low for two and a half years, was set to the reduced level by the Bank of England’s Monetary Policy Committee in March of 2009.  The MPC cut the rate in an effort to promote economic recovery by making mortgages and business loans less expensive.

However, those with personal and business bank accounts have suffered from the low base rate as well.  Savers who have been facing savings account rates sometimes as low as 0.1 per cent may need to face the inevitability of at least another 12 months of rubbish interest rates, economists warned.

IHS Global Insight’s chief UK economist, Howard Archer, recently said that the consultancy expects interest rates to remain unchanged throughout 2012.  While homeowners with variable mortgages will welcome the news of ultra-low repayment rates, savers have little reason to rejoice as their savings income has all but evaporated into thin air.

Save Our Savers campaign group spokesman, Simon Rose, remarked that the financial policies set by the BoE are threatening savers with extinction.  More than half of the nation’s savers want to see an increase in the base rate in the immediate future, according to recent research.

Meanwhile, the UK may be in danger of a double-dip recession, according to the  Organisation for Economic Co-operation and Development.

There will be very little economic growth in the UK, predicted the OECD.  Moreover, the possibility of a contraction is a very real one, the think tank added.

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