Low base rate could mean end to free banking

For many years people in the UK have enjoyed free banking services, although some would argue that the various charges and fees that are imposed under certain circumstances counteract the offer of free banking. However, banking services have essentially been free other than for those that have decided to upgrade to a paid premium account.

However, some industry officials have expressed concern that with the base rate having fallen to an all time low of 0.5 percent free banking in the UK could become a thing of the past, as banks try to find other ways in which to try and boost their revenue. Many banks have had to cut the interest rates charged on mortgages and borrowing, and this has seriously impacted on their profits.

In most cases banks tend to charge a certain amount above the base rate, and therefore as the base rate has fallen so have the borrowing rates charged by banks. Given the fact that a couple of years ago the base rate in the UK was at 5.75 percent the interest rate has fallen dramatically in a relatively short period, as the government battles to revive the economy.

The problem has already been highlighted by the Building Societies Association on a number of occasions, with officials from the BSA stating that not only has the falling base rate affected lending interest rates but also the level o savings deposits coming in, as savers are receiving little to no return on savings and looking for alternatives.