Consumers raid savings after drop in interest rates

A recent report has shown how panic hit the banking industry after consumers tried to withdraw billions of pounds worth of savings from many financial institutions because of the slide in interest rates that were being paid on savings account. The interest rate cuts came after the base interest rate was cut to its lowest level in history, at just 1 percent, earlier this month.

Over the course of this month savers have already withdrawn over £2 billion in savings, in a bid to try and find a more rewarding and attractive investment solution because of the paltry returns that banks are now offering on consumers’ savings. The drop in deposit for the month of January was said to be the biggest since the British Bankers Association began keeping records in 1997.

It was not just interest rates that affected savings deposits in banks, however. Officials have said that rising unemployment levels have also affected savings, as many have been forced to dip into their savings in order to get by having lost their jobs or having seen a cut in their income for some other reason.

Speaking about why savers were withdrawing their money one industry official said: ‘They are looking at the returns they are getting and thinking they are diabolical. There was a big shift in January, and February is running on a par with January. There is also nervousness about the banking system, so people are withdrawing cash.’