Falling base rate boosts savings account deposits

09 December 2008 / by Rachael Stiles
While the falling base rate means that savers are not getting the same returns on their savings, it does at least mean that they might have more cash available to pay into savings accounts, research from Nationwide has suggested.

November has seen a shift in the way people are saving, Nationwide found, showing an increase in the proportion of consumers who save regularly to 52 per cent, up from 47 per cent in October.

Nationwide has suggested that the two consecutive cuts to the base rate by the Bank of England in October and November enabled people to put a bit more money aside because they weren't spending as much on other outgoings, such as a variable rate mortgages or other loans.

The change in the amount that people are paying into savings accounts is reflected in their attitudes towards saving, which Nationwide found have become more encouraging since the base rate cuts.

In November, almost a third of people felt they were saving about the right amount, compared to just a quarter in October, while those who think they are saving less than they should be has fallen from 60 per cent in October to 56 per cent last month.

Falling food and fuel prices could also be contributing to people having more cash available for saving, offering a promising view of household finances after months of cutting back as the cost of living skyrocketed.

However, consumers are still concerned about their ability to save in the future, Nationwide said, with a third of those asked predicting that in six months' time they will be saving less than they need to.

Matthew Carter, director of Nationwide savings accounts, says: "The recent reduction to fuel prices and monthly mortgage payments seem to have had a significant impact on some people's attitude to saving. The savings optimism seen in consumers may also be a symptom of reduced spending on the high street with some stores already offering discounts and special offers ahead of Christmas to encourage people to start spending.

"We believe it has never been more important to put money aside to help households weather the current financial storm. Consumers seem to recognise this and instead of spending the money that would otherwise have been used to fund higher living expenses, it's being put to one side."

© Fair Investment Company Ltd