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Savings rates slip to another new low point

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Savings accounts were delivering record low returns in January, new figures have revealed.

Data from the Bank of England has shown that the interest rates paid on branch-based instant access and notice accounts, tax-free cash Isas and fixed-rate savings bonds last month were all at the lowest level since records began.

Notice accounts were paying out an average of just 0.29 per cent, down from the average of 0.9 per cent that was being offered in December.

Instant access accounts have also been hit by the slide in the Bank of England’s base rate. Last month the average instant access savings account was producing a return of just 0.51 per cent compared with the 0.81 per cent of December and the 2.77 per cent that was being paid a year ago.

Isas, too, have suffered, dropping to an average rate of 1.38 per cent, a plummet in value from the 5.06 per cent they were producing in January 2008.

Fixed rate bonds have not been spared either, with their average rate of return sliding to 2.35 per cent last month. As recently as October 2007, fixed rate bonds were delivering returns of 6.15 per cent.

The news looks set to get worse for savers as the figures do not take into account the latest cut in base rates to 1 per cent.

The concern is that such poor rates of return will discourage people from saving, so curtailing the funds that many banks and building societies have for mortgage lending.