Blow to savers as interest rates hit record low of 1%

Published on Thursday 5 February 2009 21:59

INTEREST rates hit a new low yesterday, after the Bank of England's fifth cut in as many months.

The Bank reduced rates by half a point to 1 per cent – the lowest in its 315-year history – in its first meeting since the UK's slide into recession was confirmed.

While four million homeowners will enjoy lower mortgage rates, savers – who vastly outnumber borrowers – face yet another fall in their already-dwindling returns. The Building Societies Association, which had campaigned for rates to stay the same, said the cut was an "assault on savers", who had now seen their interest payments drop by 83 per cent since July 2007.

Joe Harris, general-secretary of the National Pensioners Convention, said: "For the five million pensioners with savings, today's cut in interest rates will come as a further attack on their living standards."

Meanwhile, the European Central Bank (ECB) announced eurozone interest rates were to remain at 2 per cent, pushing the pound up to a two-month high of 1.14.

Mark O'Sullivan, trading director at Currencies Direct, said the boost reflected the fact that the pound had already "hit bottom" and investors' dismay at the ECB's reluctance to pull rates down further.