Savings rates hit by interest rate decision Go compare with our comparison table

Savings rates hit by interest rate decision

08 February 2010 / by Rebecca Sargent

There was more bad news for savers last week as the Bank of England's Monetary Policy Committee chose to keep the Base rate at 0.5 per cent for the 11th consecutive month.

According to Defaqto, the average interest rate for a £1,000 balance in an instant or easy access savings account is currently 0.88 per cent, which is well below the current CPI inflation rate of 2.9 per cent.

And as Base rate remains at its record low, savings rates are unlikely to rise, David Black, banking specialist at Defaqto said: "It is no surprise that the bank Base rate is unchanged for the 11th month in a row but it is seriously bad news for Britain's hard pressed savers and particularly for those on modest incomes who rely on interest from savings to boost their means.

"It will be a severe blow to many retired people," he adds.

Meanwhile, Fair Investment Company research has found that 76 per cent of investors surveyed are more interested in investing in riskier investments compared to cash deposit accounts, while the base rate remains so low.

Commenting, Nick Scarrett, head of pensions and investments at Fair Investment company said: "It is no wonder that most people looking to invest are steering away from cash in order to get better returns."

However, there are things that savers can do to boost their savings, Mr Black adds, saying: "It has been apparent that inertia and loyalty does not pay in the current savings market.

"A proactive approach by moving variable rate savings accounts to take advantage of things like introductory bonuses from those banks and building societies appearing in the best buy tables would boost the returns for many."

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