It is now exactly six years since the Bank of England slashed base rates to 0.5% in March 2009, plunging savers into misery.
The average rate paid on an instant access account has fallen from 3.1% before the financial crisis to just 0.78% today, according to figures from Hargreaves Lansdown.
Billions are languishing in accounts paying 0.1%.
The Bank has destroyed the wealth of millions of pensioners who simply wanted a low risk for their savings.
Worse, there is no end to the agony in sight.
Two Decades Of Low Rates
Last year, most pundits claimed the first base rate hike would come in the spring of 2015. Well, here we are, and it’s not happening.
Now the same people reckon it will happen at some point in 2016. With the global economy continuing to struggle, there’s a strong chance they’ll be wrong again.
As Fidelity Personal Investing has pointed out, following the 1930s depression interest rates were stuck at 2% for around 20 years, right through to the 1950s.
Recovery from this kind of crisis can be a long hard slog.
As global debt levels spirals, I can’t see when rates will rise. Savers’ agony will continue.
Lowest Of The Low
Incredibly, rates could even fall. With CPI inflation an all-time low of 0.3% the Bank of England may actually cut base rates to fend off deflation.
If it does, savers’ misery will only intensify.
The government has life even worse for savers by lavishing mortgage lenders with billions of pounds via the Funding for Lending Scheme.
This meant that banks and building societies no longer needed to attract money from savers to fund their mortgage lending, so they abandoned them.
High Flying Share Prices
Yet the last six years have been terrific for stock markets, as low interest rates and QE turbo-charged asset prices.
Six years ago, the FTSE 100 languished at just over 3500. Today, it is riding high at just under 7000, having doubled in that time.
Once you include dividend income, which currently gives you an average yield of 3.5% a year, the returns are even greater.
Over the last six years, the UK stock market delivered a total return of 139%, Hargreaves Lansdown calculates.
By contrast, leaving your money in a savings account paying 0.5% for the last six years would have given you a total return of 3.03%.
Savers certainly won’t be celebrating six years of rock bottom base rates, but stock market investors should be.
