Savers ‘kicked in the teeth’ by rate cut

Savers 'kicked in the teeth' by rate cut

Last week’s base rate cut to 0.5% was a ‘kick in the teeth’ to savers, the Building Societies Association (BSA) said.

Savers “will see their already diminished interest payments fall even further,” said Adrian Coles, BSA director-general.

The Bank of England cut rates to a new record low of 0.5% on Thursday in an effort to stimulate the UK economy out of recession.

The BSA believes the cut will be a further blow to the nation’s savers.

Coles said the effects of the cut will be felt most strongly by those who rely on interest from savings for income.

“It will be felt hardest by the many elderly people who have saved responsibly all their lives and are reliant on their savings interest to maintain an acceptable standard of living in retirement,” he said.

Potential first time buyers will also be frustrated by the reduced base rate.

Coles said: “It will also harm the aspirations of the many people who are finding it difficult to get a mortgage, particularly first-time buyers with relatively small deposits.

“Lower interest rates reduce the incentive to save, and in turn, this limits the flow of funds into the mortgage market.”

After February’s base rate reduction, 86% of high street savings providers followed with rate cuts of at least 0.5% on savings accounts.

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