Don't bank on better savings rates even when the base rate rises

2 March 2010

Savers have repeatedly been referred to in the media as the “silent majority” who are the “real victims” of the credit crunch.

The Bank of 
England base rate has been at an all-time low of 0.5% for a year now and savings providers have steadily 
reduced rates on cash ISAs, fixed-rate bonds and instant access accounts, leaving people who rely on the income from their savings pretty much high and dry.

In January, a new action group – Save Our Savers – was launched, dedicated to campaigning for fairer 
treatment and political recognition. One of its 
demands is that savers be protected from low interest rates. Spokesperson Rev. John Strain argues that there are several government initiatives to protect struggling borrowers, so why not savers?

A recent Moneywise poll shows that most of you agree. But how this could be done remains to be seen, as interfering in market forces is not a step any government will take lightly.

What concerns me most is what will 
happen to savings rates once the base rate (inevitably) rises. I know many savers are waiting for this to happen, convinced they’ll see their income restored, or at least given a slight boost.

But even if your money is in a variable-rate account, there’s no guarantee that a higher base rate will be passed on to you. There’s more chance that new savers will benefit, not existing ones. If you have a fixed-rate account, you’ll have to wait until your term expires before you can take advantage of any attractive new rates.

And if you were tempted by the high returns on a long-term savings account offered all of last year, then you’ll be waiting a while.

When the base rate was first cut dramatically at the end of 2008, many banks failed to pass this on to their standard variable-rate 
borrowers. I’m not optimistic we’ll see them be any more generous to savers when the time comes.

Rebecca Atkinson is editor of