Words About Things

Savings rates have hit a record low, in January notice accounts (simply accounts which require notice before withdrawals) paid an average of just 0.29%. Instant access accounts, for instance instant access ISAs, were also at an all time low. The fifth interest rate cut since October occurred on the 5th of February, bringing the rate down to just 1% . All this has lead to worries that consumers will be dissuaded from putting their money in savings accounts. This would only exacerbate the bank’s problems as they will have less to lend.

There are of course other factors involved. The massive amount of job losses that have occurred so far this year will have an impact. While some will be forced to live off their savings, others will see this as a possibility and attempt to save more incase they have to rely on their investments in the future.

Some will choose this as a good time to invest in property. The cut in interest rates makes mortgages a more viable option and it is hoped that this will kick start the stalled property market back into life. Rental prices have been increasing in most areas for the past few years to the point where monthly mortgage payments are often lower than rental prices. Those who have enough money for a deposit will be tempted by low rate first time buyer mortgages in the coming year.

The recession is forcing us to become more aware of the financial situation both nationaly and in terms of our own accounts. With daily updates about the status of various courporate banks on the news each evening it is hard

Reductions in interest rates and increasing economic pressures have left many Brits unable or unwilling to add to their savings account. As the cost of food remains high and many salaries are frozen or cut many of use are not using our accounts as we once were.

The Financial Times reports that many seem to be favouring their pensions over savings accounts. If interest rates get much lower this may become more common.

“With the base rate at an all time low and the recent disclosure by the Bank of England that returns have dropped to an average of 0.29 per cent on some savings accounts, it is not surprising people have started to question why they are bothering.”

Martin Palmer, Friends Provident.

Sharon Bratley of fairinvestment.co.uk says that raiding savings accounts should be a last resort. With a third of Brits expecting their disposable income to reduce within the next few months it may become a reality for more of us.

Some banks are suggesting that it is now a good time to switch and save in order to make the most of savings. Their are various offers available to those looking to switch current account. It is worth remembering that you have little to gain by being loyal to once particular bank, and many are choosing to go wherever the best deal is.