Savings rates fall to their lowest levels on record

Moneyfacts UK Savings Trends Treasury Report data, not yet published, reveals that interest rates have dipped to record lows across the savings spectrum. This month the average easy access rate fell to 0.19%, which is less than a third of the rate of 0.60% paid a year ago. Fixed rates have also dropped with the average one-year bond paying less than half that it did back in December 2019.

All average savings rates fell month-on-month and are at their lowest point since our electronic records began in 2007.

Product choice fell slightly month-on-month: there are now 1,514 savings deals (including ISAs) on the market which is 312 fewer deals available than a year ago.

Rachel Springall, Finance Expert at Moneyfacts, said: “Clearly it has been a tough year for savers, and they will be approaching the end of 2020 with rates falling to record lows. The Coronavirus pandemic and subsequent Bank of England base rate cuts have left an unprecedented impact on the savings market and uncertainty remains.

“Savings providers have had to react to an extremely volatile market this year and this has meant deals have been cut multiple times in a short space of time in some cases or withdrawn from the market entirely. In recent weeks, the easy access market has changed considerably as savers continue to flood this arena thanks to the flexibility the accounts provide, and the recent rate cuts made by National Savings and Investments.

“The latest Bank of England statistics show that the inflow into interest-bearing sight deposits hit £7.1bn during October, a rise from £6.6bn in September, and since January an inflow of almost £70bn. Data from UK Finance echoes that savers have built up cash reserves from the lockdown and the majority of consumers are preferring easy access accounts over a fixed term, which is understandable considering prevalent economic uncertainty. Savers may well continue to choose quick access to funds over a higher rate of interest moving forward.

“Cash ISAs have not been left unscathed from rate cuts this year and some savers have even drawn cash out, as the Bank of England recorded an outflow of £358m from cash ISAs in October. ISAs still provide longer-term tax-free benefits and it’s important that savers review any ISA they have and consider switching accounts if they find their rate is no longer attractive.

“The sight of record low interest rates may cause apathy among savers, but it is vital they continue to compare deals on a frequent basis, especially if they have their cash within an easy access account or are about to come off a fixed-rate deal. There are many challenger banks that continue to take a consistent place within the top rate tables, so it really is worth considering these more unfamiliar brands if savers are hunting down the most attractive rates.”

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