Research by Moneyfacts.co.uk has uncovered the devastating impact the Government's £80-billion Funding for Lending Scheme (FLS) is having on the savings sector, one year on from its launch.
The scheme, designed with the intention of boosting the ailing mortgage market, saw banks and building societies offered cheap money to fund loans and mortgages, under the condition that they lent it out as affordable credit.
Whilst the scheme may have increased lending to consumers and small and medium-sized businesses, Sylvia Waycot, Editor of Moneyfacts.co.uk, claims it has spectacularly backfired for savers, due to lenders no longer needing savings to lend out for mortgages as they traditionally have.
"It's the pound in our pockets that matters the most and FLS means that the average £108 interest available on a £10,000 easy access investment prior to launch has reduced to just £67 a year," she said.
"The same investor in a five-year fixed rate bond is looking at a loss of £146 this year as the average return has fallen £378 to only £232.
"But perhaps even more alarming is the fall in monthly interest accounts where the average amount paid to supplement incomes has fallen to just £7.08 a month on a £10,000 investment.
"FLS is set to be with us for a few more years and unless the Government comes up with a counter plan to help savers, such as insisting that lenders borrowing from the cheap FLS pot do so without causing detriment to savers, the unpalatable truth is that there are going to be meagre returns for some time," Ms Waycot warned.
Interest on £10K over 1 year
Interest per month
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