2016 was a terrible year for savers, marked by low interest rates and complacency amongst banks.
Over the past year, easy access ISA rates have fallen to such a low level that it has became impossible to beat inflation with one, and with many high-street names offering as little as 0.01% for your cash, it has become challenging to make even £1 for every £10,000 safely squirrelled away for a rainy day.
On top of this, fixed-rates accounts have kept on falling, with not enough new challengers coming forward to compete with existing names.
Cash ISAs are now essentially redundant for any who hadn’t been substantially saving into them since their 1999 inception.
The result is that savers are now left scratching their heads. With seemingly nowhere to go for any kind of growth on capital, many looked to the future with trepidation. But is this worry really necessary?
Let’s look ahead to the remainder of the year and see…
Grounds for optimism
Although 2016 was a truly awful year for savers, it was not unfailingly so. Towards its close, a positive movement was seen within the savings market, especially amongst fixed-rate bonds, prompting optimism for the year ahead.
This is supported by the growing speculation that 2017 will bring with it a rise in the base rate. With soaring inflation likely to put an increasing amount of pressure on the Bank of England, this would necessarily result in better interest rates for savers.
The downside to this is the potential long-term impact of rising inflation itself, which would reduce the value of savings over time.
Luckily, there are other factors to help weight such an effect. Much of the upwards trend seen towards the end of 2016 is attributable to growing competition between providers, which if it continues, will almost certainly drive positive change.
Catalysed by the increasingly frequent arrival of challenger banks, which show no sign of disappearing from the picture, this could prove very handy for struggling savers.
Unfortunately, the effect of this will probably not be universally felt across all parts of the savings market. Demonstrating a far more dramatic impact on fixed-rate bonds than other areas where these entities are not competing as strongly, the presence of challenger banks is less likely to help the rates of either easy access accounts or cash ISAs.
Despite this, the combined impact of an almost inevitable rise in interest rates and the forced increase in competition amongst banks could prove to have a very positive effect on the savings market as a whole in 2017.