Frustrated savers are ditching high street providers and turning in rapidly growing numbers to online lending after watching cash returns plunge in recent months.
Peer-to-peer or social lending firms offering savings rates double those available from banks and building societies have reported surging demand as desperate savers look to escape the inflation trap.
The hunt is on for new ways of earning decent interest on cash deposits after fresh warnings that savers face at least two more years of below-inflation returns.
It was four years ago this week that the Bank of England slashed interest rates to 0.5 per cent, a move that has cost consumers some £220 billion in lost interest in the intervening period, according to the Save our Savers campaign.
The interest paid on savings accounts has plunged even further since August, when the launch of the bank’s funding for lending scheme (FLS) gave banks and building societies access to cheaper funding.
With a reduced need for cash deposits to finance their lending, banks and building societies quickly set about reducing their savings rates. The average interest on cash Isas has fallen from 2.5 to 1.8 per cent since August.
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