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Moneyfacts reports fall in number of savings accounts

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by Jan Harris
Moneyfacts reports fall in number of savings accounts

The Funding for Lending Scheme (FLS), launched by the Bank of England and the Treasury this summer, has caused a sharp fall in the number of accounts available for savers, according to Moneyfacts, a leading provider of personal finance data.

FLS is designed to increase the availability of mortgages and business loans by providing banks and building societies with £60 billion of low-cost funding from the Bank of England.

The more they lend, the more they are allowed to borrow, and those that increase their lending pay the lowest fees.

While FLS has been effective in increasing the availability of mortgages, it has also reduced the need for lenders to attract funds from ordinary savers.

The number of savings accounts including Isas has fallen by 15 per cent to 2,038 this year, Moneyfacts says, with over half of them being withdrawn last month.

It expects the current low interest rates on savings accounts to persist for four more years.

Moneyfacts Publishing Director, Sylvia Waycot, said: “Moneyfacts research shows the devastating effect that the Funding for Lending Scheme is having on savings and there seems to be no sign of any let-up in the misery that is sure to be inflicted on the nation’s savers.

“Providers are no longer just cutting savings rates as they were a month ago, they are now pulling entire products as they find that constantly reducing rates is not enough to remove them from ‘best buy’ tables.

“Of those products left, many offer reduced rates that barely match the Bank of England base rate,” she added.

The base rate stands at the historically low level of 0.5 per cent.

Yesterday, the Bank of England decided to keep interest rates at the same level and to hold off on launching a further round of quantitative easing (QE), despite concerns that the economy is contracting again.

This has led to speculation that the Bank is pinning its hopes on FLS to boost the economy and has lost faith in the effectiveness of QE.

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News posted: December 12, 2012

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