You won't need reminding about the dismal state of savings rates at the moment – a quick glance at your online banking account will do that for you. But do you know just how much you've potentially lost out on as a result of such appalling rates? Well, according to calculations from Hargreaves Lansdown, it's an eye-watering amount...
Their figures show that cash savers have collectively missed out on £160bn in interest payments since the financial crisis – which equates to a loss of £6,000 per household – and it's all due to low interest rates.
In September 2008, for example, before interest rates fell, the average rate on an instant access account stood at 3%, but it's now fallen to a measly 0.8%. It's this dramatic fall in interest rates that has led to such a stark fall in returns, and it's even more concerning when inflation is taken into account.
Hargreaves' calculations went on to show that, if £1,000 had been invested in a typical instant access savings account in March 2009 (when base rate was cut), it would now be worth £1,060 at face value – but after inflation has been factored in, the spending power drops to just £905.
Not only that, but a worrying amount of savings is being held in accounts that pay no interest whatsoever – the amount of money held in non-interest bearing accounts now stands at £164 billion, compared with £33 billion at the beginning of 2008, as providers have slashed rates as far as they can.
Unfortunately, it doesn't look as though things are going to improve in the near-future. The Bank of England is widely expected to keep base rate on hold at its policy meeting later today, heralding the 7th anniversary of rates being at 0.5%, and analysts now predict that there's a higher probability of a rate cut this year than a rate rise (the figures stand at 30% and 5% respectively).
"Loose monetary policy has obliterated the returns enjoyed by cash savers, who now face an eighth year of rock bottom interest rates," said Laith Khalaf, senior analyst at Hargreaves Lansdown, "[and there's] little sign of any respite. The current low inflation environment does at least mean cash returns don't look quite as rotten as they might, though that will be pretty cold comfort to savers."
All in all, it's not looking good – but there are ways that you can buck the trend and get more from your hard-earned cash. The first and most important thing you can do is compare savings accounts to make sure you're getting the best deal. Many high street banks offer truly uninspiring returns – NatWest has just announced that it's cutting its easy access account rate to a measly 0.25%, for example – but there are plenty of lesser-known banks that are fighting your corner.
Challenger banks are still leading the way when it comes to savings rates, and with them you can earn as much as 1.65% from an easy access deal (from RCI Bank UK) and 3.20% if you're willing to lock your money away for five years (from Milestone Savings), so it could pay to think outside the box. And what about high interest current accounts? You could earn as much as 5%, and although such impressive rates will be limited to certain balances, they could be a great home for at least a portion of your savings.
Another route to go down could be stocks & shares ISAs. Because your money isn't being held in cash you've got the potential to secure far greater returns, but on the flipside, there's also the potential to lose money, given that you're directly investing in the stock market. It's for this reason that they won't be for everyone, but if you're willing to take on that extra risk, they could be a solution to your interest woes.
Compare savings accounts
Consider high interest current accounts
Find out more about stocks & shares ISAs
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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