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Livret A drops to 0.75% record low

Savers' interest will drop by a quarter when the new rate comes in on August 1

SAVERS with a tax-free Livret A account will see their annual interest drop by a quarter from August to a new record low.

The rate paid on the popular savings account will be cut from 1% to 0.75% from August 1, confirming predictions that the rate would fall in line with inflation, which was just 0.3% in June.

A rate cut should have happened earlier this year, but the governor of the Banque de France opted to delay making the cut as the return on the Livret A was already at a record low of 1%.

Last year, when the rate was cut from 1.25%, savers withdrew €6.1billion euros from their Livret A accounts, opting for other savings vehicles instead.

Created in 1818, the Livret A paid a regular 4% through most of the 1980s and 1990s - and as recently as 2008, after which savings returns began to tumble.

While bad news for savers, the interest rate change will give a boost to France's social housing sector. Livret A deposits are used to offer cheap loans to house-building projects, which will now benefit from borrowing at a lower rate of interest.

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