Savers urged to take action as £600bn in cash 'lost' to low-interest accounts
Savers are losing billions of pounds to low interest rate accounts
GETTY
Britons are being urged to take action Britons are “losing” over £600billion in savings to low-interest accounts.
Research carried out by Paragon Bank found that £291.4bn of adult savers’ money in the UK are being kept in accounts with interest rates earning two per cent or below.
Savings rates have been bolstered by the Bank of England’s decision to raise the base rate to 5.25 per cent with this hike being passed onto customers via banks and building societies.
The central bank’s Monetary Policy Committee (MPC) implemented these rate increases in an attempt to bring inflation down to its desired target of two per cent.
For the 12 months to May 2024, the consumer price index (CPI) eased to this level but the Bank held off cutting the base rate during its last MPC meeting.
Despite high rates, this has not stopped thousands of Britons leaving their cash in low-interest savings products.
Do you have a money story you’d like to share? Get in touch by emailing money@gbnews.uk.
The Bank of England base rate has held interest rates at a 16-year high since it was hiked to 5.25 per cent last August GB NEWSAccording to Paragon Bank, the amount of money lost to this trend rises to £609.7bn when including cash held in non-interest bearing accounts.
Some £858.5bn is placed in savings accounts which are earning 2.01 per cent interest or more.
More than half of this sum is placed in savings accounts earnings 4.01 per cent or higher, the bank claims.
Experts are sounding the alarm that an account paying interest at or below the current rate of inflation is losing the holder’s money in real terms.
This is because the price of goods and services is increasing faster than the interest they earn on their account.
Conversely, cash held in savings accounts paying rates higher than the inflation rate increases the purchasing of those funds.
Around £350bn in savings earning over two per cent is held in fixed-rate accounts with £480.4bn kept in easy access products.
LATEST DEVELOPMENTS:
Interest rates on savings have been rising in the last couple of years amid multiple rate hikesGETTYDerek Sprawling, Paragon Bank's managing director of Savings, broke down why it is important for bank customers to ensure they have secured the most competitive deal.
He explained: “Savers have had to wait for a long time for their money to grow in real terms, but it's positive for them that through banks passing on increases in Bank base rate, and the switch to fixed-term products, nearly three-quarters of cash held in adult savings accounts is now increasing their purchasing power.
“However, if you combine money held in current and savings accounts earning two per cent or below, that is over £600bn losing money in real terms and seeing their purchasing power diminish.
“With so many savings accounts offering rates above two per cent, savers should make sure their money is working hard for them.”