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MSE News: Should you fix your savings at rock-bottom rates?
in Savings & investments
26 replies 4.2K views
Former_MSE_Helen Former MSE
"As savings rates continue to plummet, is there any point locking in at ultra-low returns?..."
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Using a mixture of regular savers, current account promotions and old fixed rate ISAs I have nothing fixed below 4% and nothing at all below 3%!
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It seems that rates will stay depressed until this scheme ends, and then lenders will then have to raise rates. Any idea?
Banks can continue to access funding for lending until January 2014. The lending that they have taken at that point has to be paid back 4 years after the start of the scheme, so by mid 2016. Savings rates should start to improve in 2014, but will remain depressed until 2016 compared to what they might otherwise have been had the cheaper funding not been available.
Most of the savings in UK banks and building societies go to fund mortgages. As you can get mortgages at less than 2.5% at the moment, this is the reason why savings rates are so low.
The Bank of England believe that if base rate and savings rates were much higher, higher mortgage rates would mean lots of repossessions and house prices would fall. This would hurt banks but they also feel would hurt society as a whole.
Whether you agree or not probably depends whether you have a lot of savings or a lot of money tied up in property.
I looked around to see if there were any internet deals that might suit my needs but again the rates have been cut so I have arranged to move the money into this years ISA for the period leading up to April in the hope that some better deals are on offer for the new ISA 'season'
Unfortunately, what you are saying is a logical conclusion from the facts as I see them.
Where do we put our money for that period?
You want us to store thousands of pounds under the mattress? Very safe.