It's been almost five years since the last general election, and in that time a whole raft of changes to the economy have taken place. The question is, do you feel better off? Moneyfacts takes a look at the borrowing and savings landscape to see who could be benefiting.
The winners over the last five years have undoubtedly been borrowers, who have seen mortgage rates fall to record lows and personal loan rates follow suit – not to mention interest-free credit card terms extending to unprecedented levels – meaning it's now cheaper than ever to buy your own home, fund that new car or clear your debts.
Several initiatives have helped fuel this change, but perhaps the most influential was the Government's Funding for Lending Scheme (FLS). Launched in 2012, it gave banks and building societies access to cheap funding that could be lent out to borrowers, and it certainly had the desired effect – loans and mortgages are cheaper than ever before, and the scheme was so successful that it had to be restricted to business lending from last year.
The low base rate can also be thanked for the reduced cost of borrowing. Since the rate fell to its record low of 0.5% in March 2009, providers have cut mortgage rates considerably, meaning many borrowers have been able to take advantage of vastly reduced repayments.
In fact, Moneyfacts' figures can reveal that the best rate for a five-year fixed mortgage stood at 4.60% in April 2010, but today that's fallen drastically to 1.99%. Based on a typical mortgage of £150,000, this means borrowers could now save £12,434.40 in interest on a low-rate deal compared with the equivalent version in 2010 – monthly repayments amount to £842.29 on a rate of 4.60% compared with £635.05 on a 1.99% deal, saving £207.24 per month – a definite bonus!
"Personal loan rates have also edged down dramatically over the last five years, so now is the perfect time for consumers to consolidate their debts and keep money in their pockets," said Rachel Springall, finance expert at Moneyfacts. "Borrowers today would be £1,899.00 better off with a best buy loan of £15,000 over five years than if they had taken out the best buy loan in 2010."
Unfortunately, it isn't good news for everyone. Savers have suffered at the expense of borrowers, for the exact same reason that borrowers benefited – the FLS.
Because providers could get access to funding from the Government, they had no need for savers' cash to build their reserves, which meant that savings rates tumbled as providers simply didn't need to compete. In fact, in 2010, the best five-year fixed rate bond paid 5.00% compared with just 3.53% today, while the best easy access rate has halved from 3.00% to 1.50% over the same period.
"Savers are the ones left paying the price of a boom in low interest borrowing," said Rachel. "The lack of stability in the savings market, brought on by the Funding for Lending Scheme, has caused providers to race towards the bottom of the best buys, rather than the top.
"The domino effect of falling rates means savers lose £1,359.50 in interest if they tie up their money in the best five-year bond now compared with the top pick in 2010.
"In the five years since the last general election we have seen many changes, but consumers will be questioning whether they really are better off. While borrowers have seen positive changes, this has ultimately come at a cost to savers who have lost out on decent returns."
The table below compares the best rates, then and now, to highlight the two different paths the markets have taken in the past five years. So, are you feeling any better off? It all depends on your financial situation and whether you've benefited from lower mortgage repayments or have suffered at the hands of paltry savings rates, which is why it's so important to find the best deals – no matter what your circumstances may be.
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