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When will UK savers start to earn again?

While we have seen signs that the mortgage market is improving, credit cards interest rates continue to rise, loans are non-existent for many people there has been little mention of the UK savers market. UK savers have been absolutely smashed over the last two years seeing savings rates fall from over 5% in some cases to near zero. While there has been some improvement over the last few weeks, when will UK savers actually start to earn decent interest again?

This is a very tricky situation primarily because the UK government, as with many governments around the world, has predominantly used UK base rates to fight economic upturns and economic downturns. The need to increase liquidity in the money markets, and inadvertently make saving less attractive, has taken over from the need to address the issues associated with those holding significant money on deposit. As the UK economy continues to improve, assuming this improvement continues into 2010, we will at some stage see UK base rates start to rise again and savings rates will follow.

However, the bad news is that UK savings rates may not reach the level seen before the credit crunch for many months to come and those who had depended upon the income from their savings will literally have to find alternative funds in the short-term - which means potentially dipping into their savings and reducing their capital.

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