Interest rates have been at an all-time low since 2009, and savers across the nation are hoping for a speedy recovery and a boost to their savings in the flat economy.
However, hopes have been dashed as Citi has predicted that the Bank of England will keep interest rates at 0.5% until half way through 2017.
This is a year longer than expected and a clear sign of the desperate struggle to get the UK’s economy back on its feet.
Interest rates were slashed to 0.5% in March 2009, the lowest since the central bank was founded back in 1694.
While this low rate is good news for borrowers, it is causing misery among those who depend on interest on their savings.
“The market does expect the bank rate to stay low and that is reflected in the much lower mortgage rates that we’ve seen in the past few months,” said Ray Boulger, senior technical manager at John Charcol.
“Even if [the rate] is not 0.5% in 2017, it’s not likely to be much higher. The state of the economy is such that even when it does go up, it will go up slowly,” he added.
The news accompanies a warning from the Centre for Economics and Business Research that austerity could last another 10 years.
The last Labour government borrowed a record £159 billion in 2009-10 when the financial crisis struck, and the CEBR report revealed that the huge deficit is unlikely to be cleared before 2020 – or even 2023.
The gloomy outlook increases the likelihood of Britain being stripped of its coveted AAA rating, with CEBR chief executive Douglas McWilliams deeming it “almost impossible for the UK to maintain its AAA rating” in light of the forecast.
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