Bank rates so low savers lose money

MILLIons of savers are now losing money following the latest rise in the cost of living.

Inflation crept up to 0.6 per cent in the year to July following a rise in petrol prices, according to official figures yesterday.

the average savings account pays just 0.53 per cent, say experts, after a string of brutal cuts in rates by banks and building societies.

With inflation expected to rise and interest rates forecast to fall further or be frozen at record lows, experts warned that more savers will be losing money.

Last night one expert described the Bank of England’s recent decision to cut interest rates from 0.5 per cent to 0.25 per cent as the ‘death knell for savers’.

Banks have rushed to slash rates on their accounts, with a record 246 cuts in August so far. some of them, including First Direct and Marks and spencer – both owned by HsBc – have been accused of trying to squeeze more profit from customers by cutting rates by more than the Bank of England has.

Yesterday Yorkshire Building society halved the rate on its online easy access savings account from 1 per cent to 0.5 per cent.

the move came 24 hours after 3.6million people holding santander’s 123 current account were told their interest would be slashed from 3 per cent to 1.5 per cent in november.

the Bank of England has warned it is likely to cut interest rates again, with some economists predicting it could even impose negative interest rates and charge people and businesses for depositing money.

charlotte nelson, finance expert at Moneyfacts said savers are facing a ‘lethal combination’ of low borrowing costs for banks, an ‘ongoing rate cut war’ and the recent base rate reduction by the Bank of England.

she said: ‘We’ve now reached a tipping point whereby a saver in the average account is actually losing money in real terms.’

Moneyfacts stressed said 501 of the 727 accounts on offer can beat or match inflation, meaning it is more crucial than ever to shop around for a better deal.

Virgin Money offers one of the most generous easy access savings accounts, and is paying 1.16 per cent.