Crunch stops getting worse as savers’ interest rates bottom out

Tim Wallace
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INTEREST rates on bank deposits look to have hit rock bottom and can no longer fall further, according to a survey published yesterday by the Bank of England.

Rates have plunged over the past year, in part because of the Funding for Lending Scheme (FLS) through which the Bank of England has offered lenders cheap funding on the basis they increase lending to households and firms.

The quarterly study of bank liabilities found banks no longer expect the spread between retail funding costs and reference rates to fall, for the first time in the survey’s one-year history.

“Some lenders commented that deposit rates may now have reached a floor, following large reductions over the past twelve months,” said the report.

Despite the low rates, deposit volumes have increased in the last three months.