Savers are getting crushed - despite rising mortgage rates

Mortgage interest rates are going up – but Britain’s savers are being crushed again by plunging rates on their accounts.

This is not the recovery you wanted if you thought you were doing the right thing by saving up for the future.

The justification for loose monetary policy has always been that low interest rates are set for the benefit of the country as a whole, not just one group – like, say, pensioners who want to live off their savings.

As a result the benefits of low borrowing costs were deemed to outweigh the costs of low savings rates, in a bid to get the UK out of recession.

But now the economy is recovering fast mortgage rates are rising. In anticipation of a rate hike over the coming years, five-year fixed mortgage interest rates have risen from 1.03 per cent to 1.7 per cent in the last year, according to Legal and General Mortgage Club data.

That increase of 0.67 percentage points might not sound big, but it is 65 per cent rise in relative rates.

By contrast, savings interest rates are down, as this Bank of England chart published today shows.

Your savings in a new, time deposit – so also a fixed-term product, like 5-year loans – will only bring in 1.58 per cent.
That is down from around two per cent a year ago and about three per cent two years ago.