In general rates have been falling to unprecedented levels over recent months as the Government's Funding for Lending Scheme continues to hit savers hard. None more so than the announcement from M&S Bank of its plans to cut the rate for all savers on its Everyday Savings Account from 12th April 2013. The account has already seen a cut to its rate this month from 2.35% AER to 1.35% AER although this change didn’t affect existing customers who will continue to receive a bonus of 1% for the term of the bonus. However, the latest move sees the rate cut by a further 1% to an astonishingly low 0.35% from 12 April 2013 (excluding any applicable bonus). But even more shocking this is for ALL savers, new and existing.
The new rate is lower than Bank of England base rate, which has been at its historic low of 0.50% for almost 4 years. Its less than you might get on some current accounts AND over 2% less than the current rate of inflation which stands at 2.70%.
The £80bn Funding for Lending Scheme was set up by the Government to offer banks and building societies access to cheap money to lend to their customers, in order to help stimulate the housing market and, in turn, the economy. However, the knock on effect for savers has been devastating - providers are awash with cheap funds so they have no need to raise money from savers which has led to these appalling rates now being offered to both new and existing customers.
Savings providers aren’t just bringing down the shutters, they’re locking the doors.
It’s a tough time for savers and they need to do all they can to squeeze as much interest as possible from their cash. Here are our top tips to maximising your savings.
- Regularly review all savings accounts to make sure you are aware of the interest rate that you are currently earning – better still, use our free Rate Tracker service so that we can do it for you.
- If you find yourself in an uncompetitive account, ditch it. It’s important to send a message to the providers that you won’t put up with them slashing your rates.
- Make sure you use your cash ISA allowance, if you’ve not used your ISA allowance elsewhere. The tax free interest can help boost your returns.