With a fresh wave of economic uncertainty gripping Europe and the rest of the world, central banks are considering lowering interest rates even further, and in the UK that means they may soon be heading towards 0% — raising a big question for British savers, as their hard-earned savings could soon be accumulating dust rather than interest. What should savers do in this naughty era? The Guardian’s Rupert Jones has some advice, but unfortunately the overall picture is still pretty gloomy.
- Jones notes that political uncertainty surrounding Brexit is already having an economic impact, prompting state-backed banks such as National Savings and Investments to lower their interest rates, with Lloyds Bank and Marcus set to follow suit, and more to come. Other rates are already low, including HSBC’s Flexible Saver, at just 0.15%.
- Interest rates may even head into negative territory, as they already have across the continent (an ironic outcome, given Brexit’s stated purpose of freeing the UK from European tutelage).
- Jones suggests savers look for the few remaining good deals, although this term is subjective, as the best interest rates available range from 1.45% to 2.25% for some premium bonds — just about the usual rate of inflation in ordinary times. Some savings accounts offer a 25% government bonus.
- Jones also suggests savers consider an “offset mortgage,” which rewards homeowners with lower payments on their mortgage if they have enough cash in savings.
- Finally, savers who aren’t earning any interest on their cash might consider putting it to other uses, such as making loans with generous interest rates to family members. Parents can help their kids out with deposits on home purchases or other big expenses. It’s worth noting that real estate has generally appreciated at a faster rate than most savings interest rates, so the return (albeit to their kids’ rather than their own finances) could be substantial.