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Savings product interest rates in decline, experts says

22. Jun, 2011 Categories: Business Bank Account Updates, News by Business Bank Accounts 0 Comments

Savings product interest rates have recently been in decline, according to new research findings recently released by one financial expert.

Brits that hold long-term savings accounts may be in for some difficult times in the immediate future, said an HSBC-conducted study.  The study found that savers with their money in products such as long-term fixed rate bonds could quite easily end up with less money than they started with after the end of their term.

The study remarked that the reason for such poor actual returns was due to low rates set by personal and business bank account providers.  Combined with inflation rates that quite often exceed interest rates, this results in an incredibly modest return on a saver’s investment, if not an outright loss when inflation is taken into account.

The profitability of savings products with fixed rates is also limited by the 0.5 per cent base rate set by the Bank of England’s Monetary Policy Committee.  This historic low rate has been set in place for more than two years straight, and has resulted in impacting savings product returns.

The banking giant’s study found that there were currently more than 4.7 million savings products in the UK with fixed rates.  These accounts comprise approximately £92 billion which will be approaching maturity before the end of the year.

The most common month for fixed rate bonds to mature is October, which is estimated to see 534,000 such accounts reaching maturity.  However, the HSBC survey found that the two million  savings products that have already reached maturation in previous months will end up taking a collective £242 million loss if savers make the decision to put their funds back into similar fixed-rate deals.

 

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Tags: Business Bank Account Updates, fixed rate bonds, HSBC, interest rates, savings accounts