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Savers give up on interest rate rise any time soon

Written by: Paloma Kubiak
Beleaguered savers believe interest rates will stay at the same 0.25% level they are today for the next year, though many feel a rise would benefit them personally and be best for the economy.

The Bank of England’s latest quarterly survey of public attitudes to interest rates and inflation has revealed that 36% said rates might stay at about the same level over the next 12 months, up from the 32% reported in May.

A fifth of the over 2,000 people surveyed expected rates to rise over the same period, a sharp fall from the 41% who thought so in the last quarterly survey.

And more savers are aware of the decline in interest rates as 36% thought they had fallen over the past year, compared with 13% in May.

When asked what would be best for the economy – higher interest rates, lower rates or no change – 20% thought they should go up, while 15% thought they should go down. However, 36% said they should stay where they are.

Asked what would be best for them personally, 23% said interest rates should rise while 22% said it would be better for them to fall (compared with 26% who said in May that they should fall).

Turning to inflation, consumers said the current rate of inflation stood at a median of 1.8% (July’s figure was 0.6%) though they expect the figure to stand at 2.2% over the coming year. Longer-term, such as in five years’ time, savers believe the figure will stand at 3%.

Nearly half of those polled (47%) believed the economy would end up weaker, rather than stronger, if prices started to rise faster, though 55% feel the inflation target (2%) was about right.

The proportion saying the target was too high or too low was 18% and 7% respectively.

Savers continue to lose out

Kevin Caley, founder and chairman of ThinCats, said: “Today’s Bank of England figures couldn’t be clearer – the majority of savers have virtually given up on the prospect of an interest rate rise any time soon, never mind a return to pre-crisis levels.

“The recent slashing of savings rates we saw in August, across more than 300 accounts, will have been a hard pill to swallow for many people, especially those who have put money away for most of their lives and were hoping to get a reasonable income in their later years through savings. Our recent research proves that around 10 million people in the UK are saving less money each money each month as a result of these low rates. Until rates exceed inflation, these people will continue to lose out.”

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