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How will UK base rates perform in 2010?

As we move towards 2010 and hopefully a new era for the UK economy there is a consensus forecast that UK base rates will remain at around 0.5% for the vast majority of 2010. While this will no doubt cheer mortgage holders and those who have significant debt, we need to spare a thought for savers who have been absolutely hammered over the last two years.

It is easy to forget that many people, especially those of an older age, have saved large amounts of money for their retirement with many previously living off their interest. However, with base rates slashed to just 0.5% and savings rates still under significant pressure, the income stream from savings has all but dried up for many. This has put more and more people on the financial breadline and indeed the benefit system in the UK is starting to creek. At a time when the cost of living, especially utility bills, continues to rise in the UK there is genuine fear for the short to medium term.

Unfortunately, if the UK government is looking to encourage investment and spending in the UK there is a need to maintain base rates at a relatively low level with savers the obvious losers. While base rates are unlikely to move significantly higher in the short to medium term those who have in the past depended upon their savings income will likely need to start withdrawing their capital.

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