Average interest rates on savings accounts that allow instant access to savers money is barely above zero, at 0.17% at the end of last month, therefore not taking into account interest reductions that came into force at the beginning of March.

Those with variable or tracker mortgages have seen the benefit of the reduction in interest rate, but savers and pensioners in particular are feeling the pinch.

Those with branch-based notice accounts are also seeing little reward on their savings. At the end of February, the average rate was 0.18%, which is half the figure at the end of January.

This time last year, interest rates on instant access accounts were 2.69%, much higher than the current 0.17% average.

‘Savers Being Punished’

Moneysupermarket.com’s Kein Mountford said: “savers are being punished for the mistakes of others, and that so many are looking to find better rates at a time when you would imagine security and service would be paramount, shows just how badly savers are being squeezed.”

ISA interest rates also dropped to an average of 0.96% from 5.06% this time last year.

On the other hand, interest on fixed rate bonds has risen a little, from 2.49% at the end of January, to 2.56% at the end of last month. Although, this is still around half the amount they were at this time last year.

Savers may be suffering, but mortgage borrowers are looking at lower repayments on their loans.

Customers with a standard variable rate (SVR) deal are currently looking at an interest rate average of 4.41%, nearly half what it was a year earlier at 7.5%.

Does Anyone Really Benefit?

This shows that neither borrowers nor savers have really been seen the benefit of recent interest rate cuts.

Experts are saying that interest rates can’t really fall any further, and are suggesting a longer-term fixed-rate mortgage deal could benefit mortgage borrowers more over time.

Though it has to be born in mind that it is hard to determine how many people in the UK are borrowing and how many are saving their money at the moment, it is fairly safe to assume that overall, there are more savers, but most UK householders are net borrowers.

The stats show that overall, total household savings are about £987 billion with banks and building societies, on top of £90 billion of National Savings. On the other hand, borrowing reaches £1,225 billion in mortgage debts, plus £233 billion in other consumer debts.

The funding gap – the difference between these two figures is the amounts banks are borrowing in wholesale markets, much of which comes from abroad.

What Do You Think?

Have you been badly affected by savings interest rates crashing? Do you have any advice for other people? Leave your comments here.