As UK inflation continues to rise, from 3.4% in March to 3.7% in April, there are a number of issues which will be impacted by the growing cost of living. However, one area which often goes unmentioned is the savings industry where rates well below 3.7% mean that many savers are seeing a cut in their real spending power.
UK saves are today bracing themselves for more bad news on the income front with confirmation that UK inflation increased from 3.4% to 3.7% between March and April. Whether or not the rate will subside in the months ahead remains to be seen, but with many savings accounts paying less than 3.7% interest, in effect we are seeing many savers suffering a devaluation of their spending power.
A Mori poll has today cast light on the very difficult situation in which many people in the UK find themselves after the recession. The report from Mori indicates that 20% of those in the UK have no savings whatsoever and around a third has less than £500 to their name. This comes despite the fact that the number of people in the UK who are saving has risen from 40% to 47% over the last six months.
The Coventry Building Society has today agreed terms with the Stroud and Swindon Building Society although there will be no windfall for members of either mutual society. However, members of the smaller Stroud and Swindon Building Society will benefit from more competitive rates of interest in both the mortgage market and the savings market. It is estimated that around two thirds of the 251,000 savings accounts to be transferred will see an improvement in savings rates as the enlarged company reverts to products offered by the Coventry Building Society.
In a sign of the times it has been revealed that savings rates in the UK continue to fall even though the government and various consumer groups have attempted to place pressure upon the financial sector. The top rate for an instant access savings account has fallen from 3.35% to 3% since November 2009 and the best interest rate for a one-year bond has fallen from 3.95% to 3.30% over the same period.
After the result of the Icelandic referendum on the debt repayment scheme for the UK government and the Netherlands government was announced, delivering a resounding "no" vote, the UK authorities have stepped forward with a proposed compromise. After £3.4 billion was loaned to the Icelandic authorities in order to repay savers who lost their savings in the financial meltdown a political argument broke out between the UK government and the Icelandic authorities.
The Icelandic referendum on the repayment package to the UK and the Netherlands authorities has delivered a resounding no vote which now puts the Icelandic authorities in a very difficult situation. The multibillion pound loan provided by the UK and Netherlands governments, to compensate savers who lost money in the Icelandic financial collapse, has been a bone of contention for some time. So what next?
It has been revealed that the Icelandic authorities have walked away from talks with the UK government and the Netherlands government with regards to the collapse of the Icelandic banking system back in 2008. It was just after this event that the Netherlands and UK authorities agreed a loan of $5 billion to the Icelandic authorities which was used to pay compensation to savers. However, even though a repayment plan for the $5 billion bailout package was agreed by the Icelandic parliament it was halted by the president under pressure from the Icelandic public.
UK base rates were today frozen at 0.5% by the Bank of England MPC, a move which was fully expected by analysts in the UK. However, many savers in the UK are struggling to survive on their vastly reduced incomes from their savings pots and wondering when the UK base rates will rise and when savings income will return to anywhere near "normal levels".
As we mentioned earlier today, the UK government's 100% guarantee on deposits held with Northern Rock will be lifted on the 24th of May as the "good bank" is positioned for sale to the private sector. The lifting of the 100% guarantee has been welcomed by banks and building societies in the UK who had complained that Northern Rock was in a stronger position than the rest of the sector, which had to make do with the £50,000 Financial Services Compensation Scheme maximum guarantee.
