ANALYSIS

BANK of England governor Mark Carney has been regularly scorned as an “unreliable boyfriend” for teasing savers with the prospect of higher interest rates, only to get cold feet at the last minute and back out.

Yesterday he finally put his monetary policy where his mouth is – with the Bank raising base rates to 0.75 per cent, the highest figure since February 2009.

Savers will relish this rare moment of joy but celebrations will be muted as that 0.25 per cent increase translates to just £25 a year for each £10,000 savings, and many will not even get that unless they take action themselves.

When the Bank last increased rates, in November, the average savings account rose by a paltry 0.09 per cent, while half did nothing at all. Instead, banks and building societies kept the bulk of the benefits to themselves and you can be pretty sure they will do the same this time as well.

Destruction

Savers have now suffered a decade of destruction and that looks set to continue. With consumer price inflation standing at 2.4 per cent, those who leave large sums in cash are still seeing the value of their money steadily erode in real terms.

Despite this, inertia has set in, with less than one in 10 switching savings accounts in the last three years. If you have cash sitting idle in an old savings account then use yesterday’s increase as a trigger to search for a better deal.

The best rates can now be found online, typically from smaller building societies or the new breed of challenger banks.

Those looking for something more will have to take greater risk, say, by putting the money into peer-to-peer (P2P) platforms or the stock market.

Perhaps it is wrong to carp, 0.25 per cent is better than nothing and at least the direction of travel is positive. However, with the nation’s savings levels plunging to record lows, more radical action is needed to encourage people to put money aside for their future.