10 years without a base rate rise – how have savings and investments performed?

5 July 2017

It is 10 years since the Bank of England raised interest rates, meaning savers have spent the past decade battling low rates.

The Bank of England’s Monetary Policy Committee increased the base rate to 5.75% on 5 July 2007 - shortly before the global financial crisis took hold. This is the last time rates rose and the base rate has subsequently been slashed to 0.25%.

While the central bank continues to ponder a rate rise, savers have seen their wealth shrink in real terms.

Research conducted by Hargreaves Lansdown shows that a saver with £1,000 in an easy access savings account would have a cash pile of £1,107 today. However, after adjusting for inflation – which has increased by 26% in the last decade – the real value is now £878.

Investors, despite having to weather the financial crash where the stock market fell by around 50%, have seen significantly better returns. A £1,000 investment made on the same date in July 2007 would now be valued at £1,666 or £1,323 after inflation is considered.

Low interest rates have been better news for borrowers. The average mortgage rate has fallen from 5.8% in July 2007 to 2.6% today, although the Bank of England recently expressed concerns about mortgage affordability tests

Laith Khalaf, senior analyst at Hargreaves Lansdown, says: “It’s been a decade since the last interest rate rise, so it’s little wonder that borrowers have got used to the idea of cheap money. Indeed around eight million Britons haven’t witnessed an interest rate rise from the Bank of England in their adult lives.

“Low interest rates undoubtedly helped to prop up the economy in the wake of the financial crisis, by lowering the cost of debt for UK consumers and companies. However the burden of loose monetary policy has very much fallen on those with cash in the bank, who have seen the interest they receive wither away to virtually nothing.”

Charles Hepworth, investment director at GAM, adds: “The tenth anniversary is noteworthy because it should not have happened. Slashing rates aggressively into the financial crisis was intended to provide instant relief to tightening financial conditions – in effect acting as the great shock absorber to a business cycle going into a downturn.

“But the Bank of England rate remains frozen. This demonstrates the nearness of the global financial crisis bullet that was dodged, the turbulence it brought and its lingering effects.

“It is clear that we are not operating in a normal interest rate cycle anymore and this must change, if only to avoid the dangers of another central bank induced financial shock. More recently we are hearing more coordinated central bank dialogue on the need for normalising interest rate policy. After all, when the next crisis comes, and there will be one, they have little firepower with rates where they are now.”

The table below shows how the savings and mortgage landscape has changed over the last 10 years.


July 2007

July 2017

Bank base rate



Average instant access account



Typical mortgage rate



£1,000 in cash account, inflation adjusted



£1,000 invested in stock market, inflation adjusted



Source: Hargreaves Lansdown, 5 July 2017


In reply to by anonymous_stub (not verified)

your survey response points are not logical . . the response ' i never planned to retire abroad but i now will ' shouldn't be classified as a 'No' in response to the question 'have your plans changed as a result of Brexit'its obviously a change!!!

In reply to by anonymous_stub (not verified)

all these claims about stocks performing better is simply not true i have a portfolio that was valued and checked on receipt in 2007 as good to hold yet here we are in 2017 and its worth 2/3rds of its 2007 value and the dividends are no better either The bottom line is the B of E have very deliberately targeted and penalised savers to the total benefit of the RICH and Borrowers . Yet savers outnumber borrowers 6 to 1 and the B of E is not allowed to target any sector The B of E are acting illegally and they know it and in no way whatever are they acting for the good of the people of the UK

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