Inflation 'causing savings to dwindle'

Posted: 21 Jan 2009 11:57:43 GMT

Financial data company Defaqto has claimed that the current rate of inflation is creating a scenario in which many in the UK are receiving little to no return on their savings.

The 3.1 per cent rate of inflation, coupled with record-low interest rates, means that savers now have to have particularly high rates of interest on their savings accounts in order just to tread water, the organisation has said.

David Black, principal consultant for banking at Defaqto, said: "The dramatic falls in the bank base rate has meant that savers are facing really bleak times and many taxpayers now have few opportunities to obtain a real rate of return after inflation and tax are taken into account.

"A basic rate taxpayer requires [a savings rate of] 3.88 per cent just to keep pace with inflation."

Such news is particularly negative for those hoping to buy property, as it means the road to saving for a mortgage deposit will be lengthier than in recent years.

Finding a property online, however, may offer benefits to buyers, as homeowners can sell a property online without an estate agent, saving both parties a significant sum.



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