Due to the current condition of the global economy, finding good savings rates is more difficult now than it has ever been. Enormous banks due to their wide customer bases, are often able to offer better saving rates (such as Santander savings rates) than most, however, even with your average bank account, you may find yourself losing out.

The reason for this goes back to the Bank of England base rate which has been at a historic low of 0.5% since the economic crisis started. The Federal Reserve in the United States recently announced that it expected to keep its base rate at current levels until around 2013, so we can expect the BoE to follow suit.

There are many reasons for keeping this interest rate low. The most commonly cited one is that it helps people who have mortgages. The economic crisis started with the collapse of a housing bubble, which saw many people suddenly have a lot less equity than they thought they did. By keeping interest rates low, the hope is that people will be able to get back in control of their mortgages and avoid any more costly repossessions which are bad news for individuals, and for the banks.

The flip side of this coin, however, is that things aren’t great for savers. Most banks offer accounts with rates that are similar to the Bank of England base rate, so for savers, 0.5% really doesn’t mean any real return.

Further, because of the high cost of things like fuel, and food, and just about everything else, inflation is currently running at above 3%, far above the Bank of England’s target. Even if inflation was under control, the target is only 2%, still much higher than the current interest rate.

The figures work out like this:

You have £1,000 in an account earning 0.5% interest. At the end of the year (very simply) you should have £1,005. However, in the same period, what was worth £1,000 at the start of the year is worth £1,030 at the end. So your money is literally losing value as you try to save it.

The only way out of this trap is to find a better rate, and there are good deals around if you can make the most of them. Alternatively, if you have a mortgage, it’s much better value for money to pay off as much debt as you possibly can whilst the interest rate is low. That way, you’ll have less to pay when the interest rate does go back up, and you won’t have been losing value on your savings at the same time.