Oh to be a saver in a country currently run by Bank of England boss Mark Carney. Oh dear, indeed.
It’s difficult, excruciatingly painful and barely rewarding.
Yes, let’s not mince our words and just spell it out as it really is. Savers are the fool guys and girls, paying a heavy price for ensuring the economy remains on track as the country meanders to the signpost labelled Brexit – and also so that our Great British banks (sarcasm intended) keep out of financial trouble. Sadly, ladies and gentlemen, there is no end to the misery that savers are enduring.
Indeed, if I were a betting man (I only have an occasional small wager during the Cheltenham Festival) saving matters are going to get a lot worse before they get better. Be warned (sorry for the bad news).
The recent halving of the base rate by the Bank of England to 0.25 per cent has triggered a meltdown in savings rates across the market. Banks big and small, new and old, and cuddly building societies have all taken an axe to their rates. Few savings institutions have spared their customers. Instant access savers, ISA savers – anyone whose interest payments are variable rather than fixed – have all seen their rates given a proverbial close shave.
A week or so ago, I asked the ever enthusiastic Anna Bowes of website Savings Champion to send me over a list of accounts where rate cuts had been applied – or were about to be administered – by providers in the wake of the Bank of England’s decision to cut base rate.
It was never-ending: the file was so big it crashed my computer. From the Hanley Economic, Furness through to the Progressive and West Brom, savings rate cuts have been unfurled.
Some of the cutting has been ferocious with rates skinned to the bone – 0.1 per cent is not unusual (10p of annual interest for every £100 squirrelled away).
Somewhat predictably, it is the Great British banks which are inflicting the deepest cuts. Step forward Royal Bank of Scotland, owner of the NatWest brand and still majority owned by taxpayers.
Come the end of this month, it will drop the rate on its NatWest instant access ISA to a pitiful 0.01 per cent on balances up to £25,000. Instant Saver customers will suffer a similar fate as their rate comes crashing down from 0.25 per cent to 0.01 per cent. One penny of annual interest for every £100 saved. A sorry state of affairs, bad enough I fear to turn any Methodist NatWest saver to drink.
Although the bank has already warned its business customers that negative interest rates cannot be ruled out in the future, it has said personal savers will not suffer a similar fate. But 0.01 per cent interest might well become zero interest. Royal Bank of Scotland could simply stop rewarding savers for lodging their nest eggs with them (note to self: why on earth did we ever rescue this bank?).
Worse savings news is around the corner I am afraid to say. While it is unlikely that the Bank of England’s Monetary Policy Committee will sanction another base rate cut next Thursday, one could come before the year is out (Carney confirmed as much earlier this week when he went before the Treasury Select Committee). Further savings rate cuts would ensue, as surely as night follows day.
Then there is the ‘term funding scheme’ which Carney announced in early August in tandem with the cut in base rate. This will provide banks with up to £100 billion of cheap funds which they can use to lend to businesses so as to keep the economy on an even keel as it wobbles towards Brexit. Access to this cheap money will reduce further the need for banks to fish for funds from savers through the offering of decent interest rates.
Oh dear, oh dear.
I wish there was a savings panacea out there. Maybe Philip Hammond, the new Chancellor, will do a ‘George’ and sanction a new whizz bang National Savings & Investments savings product to cheer up savers. But with a General Election not scheduled until 2020, NS&I is a trump card Hammond may think is worth keeping up his sleeve for later on.
So, savers, other than urging you to shop around for best savings rates (Bowes’ Savings Champion is more than willing to help out), there is little I can offer you by way of support other than jaw out, stiff upper lip and all the rest. Us Brits are good at that.
Jeff Prestridge is Personal Finance Editor of The Mail on Sunday
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