Savers have lost money since rates were last increased

Stock market returns are far more healthy and mortgage borrowers may be the big winners

cash money

People who have kept their savings in bank cash accounts over the past decade are in the red in "real terms", according to new figures.

Today marks the ten-year anniversary of interest rates being last increased in the UK, says Money Observer.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE
https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Rates began to be restricted in December 2007, when the "credit crunch" started to bite, and were cut more sharply in October 2008 as the banking crisis got into full swing.

The following March, they hit a then record low of 0.5 per cent, which is where the base rate stayed until last August, when it was cut to a new all-time low of 0.25 per cent to help offset an expected hit to the economy following the Brexit vote.

According to Hargreaves Lansdown, in July 2007, just £23bn was saved in deposit accounts with no annual interest, says The Guardian.

"The vast majority of savers were earning an average 3.3 per cent on cash in instant access accounts and five per cent on accounts where some notice must be given."

Now £180bn sits in accounts offering no interest. Even shopping around gives an average instant access rate of 0.4 per cent and for notice accounts a rate of 0.9 per cent.

In contrast, stock markets have recovered since the major crash of 2009. They have been setting new records since then, with £1,000 invested in shares worth on average £1,666, or £1,323 after adjusting for inflation.

Some experts reckon the low-rates environment is even inflating share values, as it has prompted institutional investors to shift more of their assets into stocks.

Perhaps the biggest winners from these persistently low rates have been borrowers, especially mortgage holders, who are paying on average half the rate of interest they were paying ten years ago – 2.6 per cent compared to 5.8 per cent.

This means they have more disposable income, although the low rates will have mostly benefitted those who already owned their home prior to the crisis as everyone else has had to cope with spiralling house prices.

Explore More