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Savers beware!

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.

In simple terms, if your savings are earning less than the rate of inflation then effectively your spending power is being reduced on an ongoing basis. The longer this continues the more impact this will have on your savings nest eggs and your ability to fund your lifestyle tomorrow and into the future. As long as UK base rates remain at 0.5% it is unlikely we will see any significant improvement in savings rates.

The only possible light at the end of the tunnel could occur if for example the mortgage market improved and banks were able to offer a higher savings rates in the knowledge that these funds could be used to finance mortgages at a higher rate. Unfortunately, with the UK property market pretty patchy to say the least and buyers concerned about the growing debt problems in Europe we are unlikely to see any significant short term improvement for UK savers.

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