How will today's interest rate move impact upon savers?
It was reported that after last month's interest-rate reduction, 95 of the 119 savings providers in the UK reduced their rates immediately to the detriment of savers in the UK. While more and more savings accounts are attracting rates approaching 0% this latest move is sure to increase that figure and put the squeeze on more UK savers. The situation for UK savers is set to get worse in the short term with suggestions that the base rate will fall further, possibly in March and April, and will take some time to rise again to former levels.
Despite a number of assurances by the government, and pressure from opposition parties, the authorities have yet to introduce any form of reduced tax or compensation for substantial loss of income from savings accounts. This has forced more and more savers to look longer term for the best rates available, often being obliged to tie their money up for significant periods of time.
While the rates available from more long-term savings instruments are substantially higher than those available on savings account, there are various penalties if the funds are withdrawn before the end of the lock in period. As more and more people in UK continue to feel the financial pinch there is a suggestion that some are concerned about locking their money up for anything up to a couple of years.
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