Interest rate case studies

High-income single earner

JAY MANEK, 34

Job: Company director of switchandgive.com
Home: Two-bedroom flat in Angel.
Income: £70,000 plus bonus.
Monthly outgoings: £2,100, including rent £800, phone £150, petrol £50, travel £80, council tax, utilities £350.
National Insurance: £580.
Savings: £50,000 which are all in one savings account with First Direct Everyday E-Saver account. Interest rate on £1 and above of 1.75 per cent.
Comments: "I put away between £50 and £1,000 every month and have built up a nest egg of around £50,000. I was going to use it to invest in property but I don't think it's the right time. I haven't been investing in anything because of the credit crunch and feel like I am between a rock and a hard place. Shares are unpredictable but I have this cash reserve and don't feel I can just leave it in the bank where it is not going to grow. I am going to seek advice on investments which are not risky and looking at investing the money in a bank abroad. My dad has been putting money in banks in India for years. You agree to lock the money in for one to two years but are guaranteed a six per cent return. When I opened my savings account three years ago it had an interest rate of five per cent. I will be ringing them to find out what it stands at now. I don't have loans or credit cards to pay off. If I had, I would have used the cash to clear any debts."

We're stuck with fixed-rate loan'

Family with a mortgage

THE O'CONNELLS: SHARA, 34, CRAIG, 35, AND CHILDREN MAYA, FIVE, AND THOMAS, THREE

Jobs: Joint directors of their own web design company, Tela Ltd, in Canary Wharf, tela.co.uk
Home: Four-bed detached in Saffron Walden, Essex
Income: (combined): £75,000 before tax
Monthly outgoings: mortgage £1,696, council tax £200, food £600, utilities £200, nursery £200, petrol and car £300
NI: £1,668
Savings: £8,000 in Premium Bonds with National Savings, £900 in Saffron Walden and Leeds and Holbeck building societies
Comments: "Today's rate cut will not affect us massively as we have so little savings, but it has made me even more disappointed I'm not on a tracker mortgage. When we took our fixed-rate mortgage in July (with Nationwide at 5.98 per cent) it looked like rates were going to keep going up. If we had gone into a variable rate mortgage it would have saved us at least £100 a month, a massive difference. In the past we put money into savings accounts every month. Now we are saving nothing."

'I live on my savings'

Pensioner living off savings

BRIDGET SAM BAILEY, 72

Job: Retired
Home: Three-bedroom house in Lewisham
Income: £110 per week state pension plus savings
Monthly outgoings: Utilities, £80, food £400, council tax £111, petrol £80
Savings: "Significant" amount in an instant access bank savings account now earning 0.15% AER and cash ISA fixed at 6.5% AER
Mortgage: N/A
Other debts: A small amount on two credit cards
Comments: "Half my income comes from my savings so I rely on them to live. The account where I keep most money has almost stopped making any money so I hope the interest rate doesn't fall any further after this new cut by the Bank of England.

"It really worries me. I thought that money was going to last me a lot longer. But I don't want to compromise the lifestyle I've become used to. I try to save by switching on the heating for shorter periods. I've got some money in an ISA that has a high interest rate and wish I had more in accounts like that. The high rates don't exist any more. Luckily I paid off my mortgage last October so that's one thing I don't have to worry about. I don't blame the Government, it's a global problem."