The Bank of England (BoE) has today announced that the base rate is being held at a record low of 0.5% for the 32nd consecutive month.
The official statement said; “The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%.”
Savers lose a further £43 billion
Low interest rates are bad news for savers who are watching their saving pots shrink against their ‘real’ value. Savers face losing up to £43 billion in the next 12 months if the base rate remains at an all time low.
Research from Save Our Savers, the independent action group, found that the Bank of England’s policies have led to a fall of 25% in the value of sterling since 2007. This has put further pressure on inflation, which is now well above the BoE target rate of 2%.
Simon Rose of Save Our Savers says; “If it was announced that £43 billion a year would be confiscated from those who are prudent and trying to save for their future to be given to the rash and imprudent who contributed to our current financial state, there would be uproar.
“But this is exactly what is happening, except that it is happening by stealth thanks to the Bank of England undermining the value of the pound.”
Compare savings accounts with Propertywide.
The Retail Price Index shot up in September to 5.6%, the highest rate for 20 years. The Consumer Price Index (CPI) fared no better, also increasing to 5.2%.
However, the Monetary Policy Committee claims that the CPI will fall next year. High inflation is not good for anyone. However, those with large debts tend to benefit as it effectively reduces the debt value in real terms.
With the UK on the brink of another recession, the MPC believes that the economy is too weak to handle an increase in the base rate. The Euro-zone crisis has not helped as banks tighten on their lending and those with Greek debt had to wipe up to 50% off recently. Now, growing concerns over Italy’s debt has added more pressure to the UK’s finances.