Rising rates will see wealthy receive £60bn in savings windfall, analysis shows
Rising interest rates will create a windfall for the wealthy, according to new analysis, with household savings accumulating tens of millions more than in recent years.
Interest income paid on households’ savings is set to rise to £90bn in 2024-25 year, up from just £5bn in 2021-22 when interest rates were at historic low, according to research from the Resolution Foundation.
However, the savings boon will be distributed unevenly across the UK’s £1.7 trillion savings pot, with the top tenth of households in terms of savings accumulating 65 per cent, or £60bn, of the £90bn.
The bottom half of households meanwhile, will receive two per cent of the total, or about £1.8bn.
Although the rise in income will be uneven, the think tank still said the average boost would be “significant across the income distribution”.
“The rise in savings interest since 2021-22 boosts the typical non-pensioner income by 4 per cent in 2024-25: a very large effect relative to our overall outlook,” the think tank said.
Interest rates have been lifted 14 times in a row to tackle soaring inflation. The Bank of England’s base rate now stands at 5.25 per cent.
Despite banks attracting regulatory attention for their “measly” rates, a number of savings products are offering customers the best deals since the financial crisis.
This came shortly after NS&I launched a one-year fixed-rate savings account last week which pays out 6.2 per cent, the highest rate offered on these products since they were first made available in 2008.
However, the Resolution Foundation estimates that real disposable income for the typical working-age household will remain stagnant next year, having already fallen by four per cent over the past two years.
This makes the current parliament the worst for living standards growth since the 1950s.
“Never in living memory have families got so much poorer over the course of a parliament,” the think tank said.