Savers are seeing huge falls in earnings from interest as base rates have fallen to record lows.
Falling interest rates have been welcomed by mortgage borrowers as 72% of lenders have passed the last interest rate in full.
Whilst that is great news for home owners, many of whom have seen their monthly mortgage payments reduced by two thirds, or even more, it is having a devastating effect on savers.
It is the retired folk who rely on savings interest and don’t have mortgages that are being hit the most.
For instance, the average interest rate on no notice accounts is now 0.66%, based on a £5,000 balance. That is £33 interest per year!
Only 11% of savings accounts now pay over 2% per year, and they would earn you the massive sum of £100 interest per year.
The problem for savers who rely on their interest as income, is that prices have not fallen anything like as much as their earnings.
Many savers are struggling now, and it is the older generation, once again, who are suffering most.
What can they do to alleviate this difficult situation? Unfortunately there is not a lot that can be done other than shop around, hoping to find the best rates.
There are a few, and I mean a few, better deals out there, if you can find them. One of them is the 5% ISA deal by Principality Building Society.
Let’s hope that other banks and building societies follow suit. After all, millions of savers are desperate for some better savings rates.