Savers to suffer new interest rate cut after Brexit vote

SAVERS will be dealt a fresh blow this week as the Bank of England prepares to cut interest rates to a new low in an effort to boost the economy after the Brexit vote.

Economists expect the Bank’s nine policymakers to lower interest rates to just 0.25 per cent, from 0.5 per cent, marking the first change since 2009, the height of the financial crisis.

A reduction in the Bank of England base rate – which is used by banks and building societies as the starting point for saving and lending rates – will ease pressure on borrowers.

But savers, who have already seen their returns dwindle following the last crisis, are likely to suffer more. The drop in the value of the pound in the wake of the decision to leave the EU is also likely to push up inflation, further eroding savers’ deposits.

Mark Carney, the Governor of the Bank of England, said last month that some monetary easing would be required “over the summer” to lift growth and employment.

Policymakers will also have to assess the impact of any action on prices, to try to prevent a big overshoot of the Bank’s 2 per cent inflation target.

Banks and building societies have already started cutting interest rates on savings accounts since the referendum result on June 24.

Twenty-eight providers have reduced savings rates by up to 0.85 percentage points, according to Moneyfacts. By contrast, homeowners with a mortgage are likely to receive a boost as borrowing costs fall. A number of mortgage providers have already cut their rates.

A closely watched barometer of consumer confidence, GfK, plunged at its fastest pace since 1994 this week. Business: Page 1