Savers ‘lose out on £160 billion due to rock bottom interest rates’
3 February 2016
Savers have lost out on an estimated £160 billion collectively due to the impact of years of rock bottom interest rates on their cash deposits, according to analysis.
Financial services firm Hargreaves Lansdown said the loss equates to £6,000 per household in the UK.
It calculated that lower interest payments have cost cash savers £160 billion in total, compared with the returns they were receiving before the financial crisis.
The firm said the interest rate that people can expect to get on an instant access deposit account, for example, has fallen from 3% in September 2008 to just 0.8% now.
Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: “Cash has been trashed.”
He continued: “Indeed, markets are now pricing in a higher chance of an interest rate cut than a rise this year.
“At the moment UK monetary policy is being held in check by two opposing forces; low inflation on the one hand, and a growing economy on the other. Should the economy falter, the scales will start to tip towards loosening monetary policy once again, either through an interest rate cut, or more quantitative easing.”
The estimated loss to savers is based on Hargreaves Lansdown’s analysis of Bank of England figures, comparing the actual interest paid on deposits from September 2008 to January 2016 with what those payments could have been, had interest rates remained at their 2008 level.
The analysis assumes that the amount of money held in deposits was the same as occurred – but it said that in reality, if interest rates had been higher, more people could have been encouraged to keep money in savings.