Sunday, October 7, 2012

The UK government clobbers savers ... again

Confirming the negative unintended consequences of zero interest rate and quantitative easing policies, the Telegraph carried an article showing how one of these policies hammers savers.
Savings rates have fallen by 10pc in just two months – and the Government is responsible. 
High street lenders have admitted that there is no incentive to offer competitive rates to savers while they can get cheap loans through the official Funding for Lending scheme, designed to help get first-time buyers on the property ladder....
"The Bank of England base rate has not moved, there have not been more stringent banking regulations introduced, yet rates have fallen significantly in recent months," said a spokesman for the fund platform. "The only difference is the Funding for Lending scheme. Cash savers should expect to see further reductions in the future."...
Analysts predicted that returns on savings could edge lower now that cheap money is available to banks via the Funding for Lending scheme. 
The £80bn scheme was launched at the start of August by the Bank of England and the Treasury. It gives banks access to cheap funding to encourage the flow of credit to households and businesses. But one unintended consequence has been further misery for savers. 
"The Government's Funding for Lending scheme was meant to help borrowers in these tough times but it looks like savers are in fact the ones being sent to the rescue – at their expense," said Susan Hannums of comparison site ...
Economists disagree about the effectiveness of the scheme. They say that not only has Funding for Lending hit savers but it has also been unsuccessful in its aim to boost the supply of credit to borrowers.

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