More bad news for savers

The decision of the Monetary Policy Committee to hold the bank base rate at 0.50% prolongs the period of poor returns for savers.

The average interest rate for a £1,000 balance in an instant or easy access account is currently 0.88% which is well below the latest inflation rate (2.9% for the Consumer Prices Index and 2.4% for the Retail Prices Index). Some accounts pay as little as 0.01% whereas the Coventry's Building Society's easy access 1st Class Postal  pays 3.15% gross AER on balances of £1,000 or more.

David Black, Banking Specialist at Defaqto, said: "It is no surprise that the bank base rate is unchanged for the eleventh month in a row but it is seriously bad news for Britain's hard pressed savers and particularly for those on modest incomes who rely on interest from savings to boost their means. It will be a severe blow to many retired people.

"There are things that savers can do to boost their savings rates. It has been apparent for sometime that inertia and loyalty does not pay in the current savings market. A proactive approach by moving variable rate savings accounts to take advantage of things like introductory bonuses from those banks and building societies appearing in the best buy tables would boost the returns for many.

"On the other side of the equation we have seen a number of Building Societies actually increasing their Standard Variable mortgage rates because of margin pressures from their existing mortgage book."