Low rates and rising inflation punish savers in real terms

“It’s never been so tough”

Hannah Godfrey
clock • 2 min read

High street bank savings are set to shrink in real terms because of a "toxic combination" of low interest rates and rising inflation, according to Octopus Choice.

Work by the peer-to-peer lending platform has shown £10,000 deposited today in an average one-year fixed-term savings account paying 0.74% would be worth £9,933 in real money terms when withdrawn a year later, assuming current Bank of England inflation forecasts (0.8%) and the average interest rates of major high street banks. On the same basis, a deposit of £5,000 would be worth £4,966 in real money terms, when withdrawn 12 months later. Over a 24-month period, the firm's forecast is similarly gloomy. Although rates are higher for a two-year savings account - paying an average of 0.9...

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