Savings rates fall to lowest on record

The financial meltdown, started by excessive lending, is nonetheless continuing to hurt savers. Savings rates dropped to a record low last month as high-street lenders continued to pass Bank of England rate cuts on.

The central bank revealed yesterday that the average instant access branch-based savings account now yields only 0.17 per cent in interest, while returns on branch-based notice accounts have dropped to 0.18 per cent. Savers have suffered from the slide in interest rates as the central bank has tried to stem the economic downturn by boosting growth and lending. The Bank's base rate has fallen from 5 per cent in October to just 0.5 per cent now.

Over about the same period, returns paid on branch-based notice accounts slumped from 3.24 per cent at the end of September to the new low of 0.18 per cent.

Average interest rates on tax-free ISAs have also fallen sharply, to just under 1 per cent at the end of February, the lowest since their launch in April 1999, and down from 1.38 per cent in January and 4.49 per cent at the end of September.

The news came as the Prime Minister promised measures to help savers. "We are trying obviously to make sure in an era of low inflation that the incentives to save can remain high," Gordon Brown told BBC Radio 4. "These are the things that we are intent on doing and I think in the Budget you will see some announcements," he added.