Consumer groups and trade bodies expressed anger at the latest 0.5 per cent reduction, arguing that it penalised savers, while doing little to help the majority of borrowers.

They also voiced concerns that with the returns on deposit accounts already at a record low, people would be put off saving, further reducing the supply of funds available to banks and building societies for mortgage lending.

Adrian Coles, director-general of the Building Societies Association, said: “The rate cut is an assault on savers who will have seen their interest payments drop by 83 per cent since July 2007.

“Savers dependent on interest income have not seen prices fall by a similar amount – their lifestyles have taken a significant blow.”

He added that savers with building societies outnumbered borrowers by nearly eight to one.

The sector has 23 million savers, although there will be some duplication in the figure from people who hold accounts with more than one society, compared with only 2.9m mortgage customers.

Pensioners, who rely on returns from their savings to supplement their income, have been particularly hard hit by the recent interest-rate slide.

Figures from website Moneynet.co.uk showed that nearly a quarter of variable rate savings accounts for balances of £500 currently pay returns of 0.1 per cent or less.

The Bank of England also published figures last month which showed that in December, interest paid on notice accounts, tax-free ISAs and bonds was the lowest since records began in 1995, while the average return on instant access accounts was just 0.81 per cent.

The already-low figures do not factor in the impact of January’s 0.5 per cent cut, which was passed on, at least in part, by the majority of savings providers.

Andrew Hagger, of Moneynet, said: “Pensioners and those who rely on a monthly income from their nest egg to supplement their income are being driven to despair as they are increasingly forced to dig into their capital just to make ends meet.”

He added that with interest rates so low, people should consider doing other things with their money, such as repaying debt.

Saga Personal Finance said savers and pensioners were the “innocent victims of the credit crunch”.

Roger Ramsden, chief executive of Saga Personal Finance, said: “Savers have seen interest rates slashed from 5.75 per cent 18 months ago to 1 per cent today which has resulted in a significant drop in savings incomes.

“For example, someone who invested £20,000 in one of our fixed rate bonds last year would have received £115 per month interest after tax, however those opening accounts at the new 1 per cent rate from today would receive £45 per month.

“The recent rate cuts have had limited effect on the economy other than supporting those on variable-rate mortgages.

“The cuts have hit savers hard, particularly those in retirement who rely on monthly interest from their savings, this means that the effect of the rate cut has been to take money out of the economy as people have less interest to spend.”

Simon Hodge, an independent financial adviser on Rubii.co.uk, also warned that the current “dire returns” on savings accounts could tempt pensioners and other cautious savers to put their money into riskier investments that were not appropriate for them.

Kevin Mountford, head of banking at moneysupermarket.com, said, “We are now getting dangerously close to the point where people will say it’s just not worth saving.

“Following the rate cut in January we ran a poll of our users which found over two-thirds were angered by continuing rate cuts.

“The Government needs to apply some vision and kickstart the savings culture – as opposed to killing it.”