Low base rate challenges saversBase rate remains stuck at just 0.5%

12 January 2012

bank of england

Low interest rates persist, but credit card rates remain sky-high

With the Bank of England keeping the base rate at 0.5%, it's more important than ever that savers and borrowers get the best deals.

The announcement from the Bank of England to keep the base rate at 0.5% - down from 4.75% in October 2006 - brings little respite to savers and borrowers.

The average credit card rates remain at over 17% and savers are struggling. The average instant access rate for £5,000 is just 0.92%, and only 0.05% higher for those with £10,000. That's a long way off the top instant access deal of 3.1% from Santander. The lowest on offer is just 0.01% from Cambridge BS. 

It's more important than ever for savers to and borrowers to check their deals. Visit our best rate credit card tables and savings tables for the best deals updated daily. 

The rate gap

The only good news for savers comes from the recent drop in inflation. The UK consumer price index (CPI) fell 0.2% to 4.8% in November 2011, although this is still some way short of the government's 2% target by the end of 2013. The next announcement is due on the 17th of January.

This means basic-rate taxpayers need to earn 6% on their savings to beat CPI after tax is removed, or 8% for higher-rate taxpayers. 

The challenge for borrowers is even more extreme with rates remaining on more than 34 times the base rate, but with our best low-rate credit card from Sainsbury's offering 6.9% it's vital that you make sure you get the best deal. 

Low savings levels

With rates at rock-bottom it may not be surprising that savings levels are also low. A recent survey by First Direct found a fifth of British households have no savings, and just under a third have less than £250, suggesting many would need to borrow money if they lost their main source of income. 

However, the latest NS&I Savings Survey found young males between the ages of 25-34 are among the best savers, putting away £104 a month on average, in comparison to the national average of £88. 

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