Challenges of saving in the current economy
London, Newcastle, Birmingham, Portsmouth, Glasgow (PRWEB UK) 17 June 2013
There are of course winners and losers in any economic cycle but according to recently published news in the Independent, borrowers are currently enjoying the prevailing economic conditions far more than savers. The borrowing market could currently be described as a buyers’ market with low mortgage rates and fees, whilst credit card issuers are also in competition with one another trying to offer lower fees and some of the longest interest-free periods on record to credit card customers. This is due in part to the knock-on effect of the Government’s Funding for Lending Scheme (FLS) which has given banks access to a supply of cash that they can then lend to the individual consumer.
However, the down side of this scheme for savers is that it has reduced the value of their savings to the banks, and with it, the interest rate they will be paid. Add the fact that the consumer prices index showed a drop of 2.4 per cent in May and it means that there are no standard savings accounts on the market to match the rate of inflation today. However, cash ISAs are still an efficient way of saving as there is no liability for tax and as a result a few offer inflation-proof returns. It is always advisable and important for savers to review different Cash ISAs on the market so they can get the most appropriate ISA for them at the best rate available.
Savers were also dealt with another blow when the Government -backed bank National Savings and Investment announced it will cut rates on three saving products, with effect from 12 September 2013. The Direct Isa will be reduced from 2.25 per cent to 1.75 per cent, the Direct Saver from 1.50 per cent to 1.10 per cent and the NS&I Income Bond will lose 0.5 per cent reducing it to 1.25 per cent. With these planned reductions, and the FLS recently extended, savings rates are likely to stay low for the foreseeable future so savers will continue to face an uphill struggle to get a decent return on their money.
A compareandsave.com spokeswoman commented: “With the current state of the economy and no significant improvement yet in sight savers should shop around for the best deal on the market that meets their individual circumstances. Make the most of personal ISA allowances and be aware of when your introductory offer runs out as that can often see your interest rate plummet.”
compareandsave.com is one of the UK’s leading personal finance comparison websites. Based in Colchester, Essex, compareandsave.com has been helping UK consumers get a better deal on credit cards, savings accounts, personal loans and more for over five years.
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