In an era where many young people do not give much thought to saving for the future, the low yields for savings deposits in recent times did not provide the much needed motivation either. However, latest reports suggest that the rates for savings deposits seem to be turning around, this time for the better.
Savings rates in the UK
The rates offered by banks on savings deposits had been either stagnant or on a decline for quite a while. This had left most people worried about the low returns from their deposits, especially those who depended solely on this income source for their survival. The recent economic downturn was being looked at as one of the reasons for this decline. However, one of the main underlying reasons was the supply of cheap funds to banks by the Bank of England for purpose of lending under its mortgage assistance program. This had resulted in the banks not needing much money via the savings deposit route.
Current trends
As per news from last week, it is now known that the Bank of England would be curtailing its mortgage assistance program. This will force the banks to look for funds from other avenues to further their lending programs. One of the main fund sources being the savings deposits, the banks now have to compete with each other to get a share of this fund source. As a result, the savings rates have finally started looking up. In fact, they have been edging up in recent months and will probably continue their rise in the near term. The highest rates currently being offered on 2 year and 5 year bonds are 2.35 percent and 3.15 percent respectively. Thus, it looks like good times have finally arrived for the individual investors.
Source: http://www.telegraph.co.uk/finance/personalfinance/savings/10488439/Savings-recovery-new-2.35pc-two-year-deal.html