Savers 'Damaged' By Government Lending Scheme

The extent to which savings rates and products are "collapsing" has been laid bare by a consumer help website.

Moneyfacts.co.uk highlights the impact of the £80bn Funding for Lending Scheme (FLS) - designed to encourage banks to lend more to households and firms to help inject more life into the UK's economic recovery.

Experts suggest that while the project has done that, it has also made lenders less reliant on the need to attract savers' deposits.

The research by Moneyfacts shows how the number of savings accounts on the market and the best rates have nosedived since the scheme was launched at the start of August.

It found that the average rate being offered to savers had gone down, from 2.82% then to 2.42%.

The number of easy access accounts had also tumbled, the website suggested, from 470 when the scheme started to 441, while the best rate had dropped from 3.2% to 2.5% over the same period.

Sylvia Waycot, financial expert at Moneyfacts, said: "The immediate knock-on effect has been the collapse of savings rates across easy access, notice accounts and fixed bonds. And the devastation hasn't been limited to just the providers who have joined the FLS."

She (SNP: ^SHEY - news) said savings account providers that have previously developed a strategy to offer accounts that are consistently good but are not the best rates have suddenly found themselves topping "best buy" tables as others have lowered their savings rates.

She believed this had caused those providers to also slash their rates to regain middle table rankings.