As discussed in recent articles, this week the Bank of England’s Monetary Policy Committee is expected to make its fifth consecutive interest rate cut in as many months, reducing the interest rate from its current 1.5 per cent to just 1 per cent or possibly even lower.
The Building Society Association (BSA) has this week released a statement requesting that the Bank of England does not make any further rate cuts as the cuts are harming savers, in particular it is harming pensioners who depend upon the interest from their savings to subsidise their income.
Adrian Coles, director general of the BSA, said the cuts in interest rates had had a severe impact on savers. He said: “The reductions, from 5.75pc prior to the run on Northern Rock in 2007 to 1.5pc, have seen incomes from savings drop by almost 75pc, although the full impact of the base rate cuts has not actually been passed on to many savers.”
The BSA covers around one fifth of all mortgages lent out and one fifth of all savers accounts.
The BSA backs up its claims that an interest rate cut will do more harm than good by stating that although interest rate cuts have assisted those on variable rate mortgages, those who are still looking for a mortgage are more interested in the number of available mortgages and their range as opposed to the cost of the mortgage and it is savers that supply the funds to make mortgages available so it is important to ensure that those with the capacity to save at all should be encouraged to do so.