Looking at the government's Funding for Lending scheme, it is easy to spot who has lost out: savers. But there is emerging hope that rock-bottom returns are finally drawing to a close following a Bank of England announcement that the scheme will refocus on businesses from January, and away from mortgages.
The scheme, launched in August 2012, offered banks and building societies access to cheap funds to encourage them to lend, and resulted in mortgage rates falling to record lows as lenders competed to offer the cheapest fixed-rate deals. However, giving banks access to around £80bn of cheap funding also reaped havoc on the savings market, as providers no longer felt they had to attract consumers' cash.
Returns plunged across the market, with the average rate on an instant access account sinking from 1.5% to just 0.67%, according to data provider Moneyfacts.co.uk.
This is despite the fact that the BoE base rate has remained at 0.5% for more than four-and-a-half years. With inflation currently running at 2.7%, money held in the vast majority of savings products is losing money in real terms once tax and inflation have been taken into account.
Andrew Hagger from website MoneyComms, says: "The scheme has impacted savers far more seriously than anyone could have imagined. We now have a situation where to beat the best rate on a one-year bond at 3.45% available before Funding for Lending was introduced, for example, you have to lock your cash away for seven years to get 3.5% with Skipton building society or First Save – a transformation of the savings landscape in just 16 months."
