UK SAVERS could lose £26.5bn over the next year as inflation eats into capital in low-interest savings accounts, according to new research from Lendy.
The peer-to-peer property platform claims that savers collectively receive just £10.06bn of interest on the £1.3trn they are putting away, based on the current average interest rate on zero and low-interest bank accounts of 0.77 per cent.
However, with inflation hovering around three per cent, savers are losing £36.6bn in interest, the research showed. By subtracting interest currently earned, this equates to £26.5bn lost to low interest rates and inflation.
Lendy added that banks may not pass on the Bank of England’s 0.25 per cent interest rate rise – its first rate hike in a decade – to savers in full.
“The amount savers are losing is staggering, even when the impact of the recent interest rate rise is taken into account,” said Liam Brooke, co-founder of Lendy.
“Savers may well not feel the effects of this directly, with many banks unlikely to pass the interest rate rise on in its entirety. Savers need a Plan B to beat inflation, looking at alternative ways to retain and grow the value of their capital.
“Clearly P2P investments are in a different league to savings – with a very different risk/return profile. However, even allocating just a relatively small proportion of a portfolio to such potentially high-yielding investments could act as a buffer against inflation erosion, provide all-important diversification and help drive returns.”
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