Section:GDN 1N PaGe:49 Edition Date:190907 Edition:01 Zone: Sent at 6/9/2019 11:51 cYanmaGentaYellowbl
Saturday 7 September 2019 The Guardian •
49▲ A Bank of England interest rate cut
could send savings rates towards zero
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Page 51C
ould the UK’s savings
rates be heading
towards the zero mark?
As the Brexit chaos
continued to unfold at
Westminster, some of
Britain’s leading savings providers
were busy cutting their interest
rates, dealing a fresh blow to
millions of people.
On Monday, state-backed
National Savings and Investments
(NS&I) axed some of its most popular
products and slashed interest rates
for loyal customers.
Lloyds Bank told customers
this week that its Instant Cash Isa
rate will drop from 0.35% to 0.2%
on Friday. Meanwhile, Marcus byGoldman Sachs, the online banking
brand that launched with a splash a
year ago, trimmed the headline rate
on its once market-leading “easy
access” account from 1.5% to 1.45%.
These will not be the last savings
rate cuts we see over the coming
weeks. For one thing, the money
market rates that dictate the pricing
of many savings products slumped
to record lows this week.
The crucial interest rate on
10-year gilts (government bonds)- which dictates the interest rate
on many mortgage and savings
accounts – fell below 0.5%.
On top of that, news that the UK
may be moving closer to a “Brexit
recession” bolstered expectations
that the Bank of England will cut
interest rates this year – perhaps by
as much as 0.5%.
That would be great news for
borrowers, but terrible for savers
at a time when many older people
appear to be using easily accessible
savings accounts as a “safe haven ”
for pension cash.
If and when there is a Bank rate
cut, much or all of it is likely to be
passed on to savers. But with the
average easy access rate at 0.64%,
and some accounts such as HSBC’s
Flexible Saver paying just 0.15%,
there is not much left to cut.
And perhaps we cannot
completely rule out the possibility
of interest rates going negative for
savers in the UK, as they have done
in European countries including
Switzerland and Denmark , where
some banks are now charging
wealthy individuals for looking after
their cash instead of paying interest.
Andrew Hagger at the fi nancial
website MoneyComms says: “It’s
not looking good for savers at the
moment .” Asked whether savings
rates could potentially headtowards zero , he says: “Potentially
on some instant-access accounts,
that could happen. If the base rate
was cut, in some instances we
could be heading towards zero or
pretty close.”
The move by NS&I is especially
notable because as well as being
one of the UK’s biggest savings
providers, it is also a government
department.
NS&I has withdrawn its one-year
and three-year guaranteed growth
bonds and guaranteed income bonds
from sale, and has cut the rate by
0.25% for anyone rolling over an
existing guaranteed growth bond,
guaranteed income bond or fi xed-
interest savings certifi cate. The new
rates range between 1.2% and 2%.
When we invest in NS&I products,
we are lending money to the
government, and in return it pays us
interest (or prizes for premium bondSavings Are interest rates
heading towards zero?
Several major providers this
week slashed rates, while in
some European countries
they have gone negative,
Rupert Jones reports Continued Page 50RELEASED BY "What's News" vk.com/wsnws TELEGRAM: t.me/whatsnws