Downward spiral in savings rates starts to eat away at consumers

Deposit accounts

Plummeting returns on savings accounts are now one of the biggest concerns for consumers, after last week's decision by the Bank of England to cut the base rate by a further 0.5 per cent to 1 per cent – the lowest level in 300 years.

The average savings rate in the UK is now less than 1 per cent and a quarter of instant access savings accounts now offer a return of 0.1 per cent or less. With the base rate having dropped by 4.75 percentage points since November 2007, three- quarters of Britain's adults are growing increasingly worried about the rates they are getting on their deposits, according to a survey by consumer watchdog Which?.

"Savings rates are a major area of concern and it's no wonder given the eagerness of banks to slash their already miserly rates at the drop of a hat," said Which? chief executive Peter Vicary-Smith. "The big banks have consistently let their customers down, so savers should vote with their feet by moving their money to one of the smaller institutions still offering decent rates."

Other concerns cited by consumers in the survey included energy prices (88 per cent), future tax levels (81 per cent) and food prices (77 per cent).