Savers are facing severe cuts to their income this winter following a brutal seven days of cuts by banks and building societies.

Britain’s biggest High Street names have spent the week axing the best deals as they cynically try to avoid being at the top of best-buy tables.

The latest Government scheme to get banks lending by giving them cheap money is to blame in my opinion. This  inflow of cheap funds means they no longer need money from savers so are cutting back rates.  In essence the Government are giving banks low cost money to lend to businesses.  Because of this the banks don’t need savers cash.  In fact they would rather not have it. If the banks find themselves top of the best rates they quickly cut their rates again.

This is not the first time pensioners and savers have suffered as the Bank of England and Treasury try to haul the UK out of recession.

The latest cuts by banks and building societies have been savage. In the past few days we have seen.  National Savings & Investments has reduced the rate on its Direct Isa from 2.5 per cent to 2.25 per cent. Halifax has cut its cash Isa from 2.5 per cent to 2.35 per cent. Santander has chopped its eSaver rate from 2.5 per cent to 1.5 per cent. ING savings has cut deals from 2.5 per cent to 2 per cent. The top rates by moving their money around are earning around 53 per cent less than a few months ago.

Although Banks deny its the Government’s scheme that is causing rates to fall, there are clear signs that ‘Funding for Lending’ is damaging the economy as it is prompting lenders to lower interest rates.

At a time when interest rates are already at rock bottom, this initiative makes banks and building societies less reliant on savers’ cash, which has provoked the slump on savings rates.

Lenders will deny that ‘Funding for Lending’ is to blame, it cannot be a pure coincidence that rates started their downward trend in August when the scheme was introduced.

Nigel Green deVere.

Blog written 8th of November