A SOLEMN mood bore down outside the Bank of England recently as a coffin was carried to its entrance.

This sombre occasion was held to mark the demise of the UK saver and the coffin, which was a replica, bore the message “£326bn savings lost”.

The mourners were, in fact, from the campaign group Save Our Savers.

Their procession marked half a decade since the Bank of England base rate was cut to a historic 0.5 per cent low.

Campaigners wanted to highlight what they say is the appalling effect that this key interest rate has had on people’s savings.

The group calculates that low savings rates, coupled with the eroding impact of inflation, have cost savers with money held in UK banks and building societies a total of £326.3bn over the past five years.

Low interest rates are often seen as a double-edged sword.

On the one hand, many people who have been diligently putting money aside, perhaps because they are about to retire, have found their savings incomes have been squashed by low interest rates.

Save Our Savers says that the average saver with a pot of £100,000 has lost more than £4,000 a year in interest income.

Shrinking savings pots also make people less likely to want to spend – money which could potentially be helping businesses to grow as the economy recovers.

On the other hand, many families whose budgets have been squeezed by sluggish wage growth and high household bills have found that ultra-low interest rates have helped to keep their borrowing repayments down.

There are 11.2 million mortgages in the UK, with loans worth more than £1.2 trillion.

And the number of people who fell so badly behind with their mortgage payments that their home was repossessed last year fell to its lowest annual level since 2007.

Financial information website Moneyfacts looked at the impact that low interest rates have had on mortgage payments.

Moneyfacts’ findings suggest that many individual mortgage borrowers are hundreds or even thousands of pounds better off in the low interest rate environment than they might otherwise have been.

Those with low deposits were found to be the really big winners out of the situation.

Moneyfacts looked at the lowest mortgage rates available five years ago against those now.

It found that someone who has a 40 per cent mortgage deposit and needs to borrow £150,000 would save nearly £800 over two years if they took out the lowest two-year fixed-rate deal currently available, compared with if they had taken out the best deal on offer five years ago.

Someone with a ten per cent deposit taking out a two-year fixed deal would be more than £5,000 better off over the twoyear period, with the lowest rate currently on the market, than they would have been in 2009.

But ultra-cheap mortgage deals are not necessarily great news in the longer term, according to some experts.

Some fears have been raised that the low bank rate and mortgage support schemes such as Help to Buy are encouraging borrowers to overstretch themselves.

Ros Altmann, an independent financial expert, says: “Keeping rates so low is merely prolonging an illusion of affordability and there are fears that many will not be able to afford even a small rate rise.”

Dr Altmann warns that this could damage economic growth in future years.