Savers lose £188bn in interest in past decade

Savers have missed out on at least £188bn in lost interest over the past ten years, which amounts to £7,701 per household, Hargreaves Lansdown revealed.

The amount of money in non-interest bearing accounts has risen from £47bn in September 2008, to £165.9bn, while markets continually predicted interest rate hikes that did not happen, with markets forecasting that interest rates would be back at around 4 per cent by the end of 2012.

Commenting, Hargreaves Lansdown personal finance analyst Sarah Coles said: “We’ve lived through a miserable decade for savers. The Bank of England slashed rates from 4.5% to 0.5% between November 2008 and March 2009, and followed this up by offering enormous quantities of cheap money to the banks. As a result, banks lost interest in competing for savings, and savings rates collapsed.

“Over this lost decade for savers, when you compare rates before the cuts to the rates we saw throughout, we’ve missed out on at least £188 billion – which is over £7,000 per household.

“Of course, without loose monetary policy we would almost certainly have been left in a much sorrier state by the financial crisis. There have been also been beneficiaries of low interest rates, most notably borrowers, who have seen their mortgage payments fall substantially. However, it’s savers who have paid the price.

However, Coles highlighted that there is a “glimmer of good news” for savers, because while interest rates remain historically low, newer banks and building societies are being more competitive, meaning that switching could get savers a “much better deal”.

“You can switch easy access funds earning just 0.25% and make 1.5% - six times the interest. The advent of online savings marketplaces also makes switching far easier, as you can move between accounts with different banks in just a few clicks,” she concluded.

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