The number of savings accounts has plummeted by 180 since March
In another blow to savers, 180 deals have been pulled since the Bank of England cut interest rates last month.
The number of savings deals fell 180 to 1,588 between 20 March and 20 April, according to data from Moneyfacts.
This is because in March the Bank of England cut the base rate twice in the space of nine days to help support the economy amid concerns about the coronavirus pandemic.
On 11 March the Bank cut the base rate from 0.75% to 0.25%, the first emergency interest cut since the financial crisis in 2008. It then followed this with a second cut on 19 March to a record low of 0.1%. This rate is factored into the interest savings deals pay.
The easy access market is already feeling the effects of these base rate cuts, with some of the big banks slashing rates to 0.01%.
The average easy access rate for someone with £5,000 fell from 0.56% in March to 0.51% at the beginning of April, and now stands at just 0.44%.
NatWest decided to cut its easy access rates to 0.01% today, joining Halifax, Lloyds Bank and Scottish Widows Bank.
Goldman Sachs has also cut the rate on its table-topping Marcus account from 1.30% to 1.20%.
Rachel Springall, finance expert at Moneyfacts, says: “Savers will be disappointed to find that deals are being pulled left, right and centre, and this vanishing act is clearly due to the base rate cuts last month and uncertainties surrounding the Covid-19 pandemic.
“Providers are perhaps struggling to sustain their lucrative offerings or are pulling deals because they have crept up the top rate tables unexpectedly, resulting in a domino effect of cuts or withdrawals.”
Springall says the savings market could remain uncompetitive for the next four years after the Bank introduced a new term funding scheme to help support small businesses.
This will allow financial firms to borrow at rock bottom rates from the Bank from May, so they can lend more cheaply.
However, this means banks are unlikely to raise interest rates to savers, as they will have no need to attract funds from this group.
The new Isa season also proved disappointing for savers, with the number of products on the market falling by almost a fifth.
At the beginning of March there were 90 Isa providers offering 417 accounts. By the end of the month there were 86 providers offering 340 products.
The average easy access Isa rate experienced its biggest month-on-month drop since November 2019, with rates falling from 0.83% in March to 0.79% in April.
Springall warns these changes may well be just the beginning, as it can take up to three months for a base rate change to be passed on to savings accounts.
She says: “In light of this savings market trauma, it has never been so vital for savers to take stock of their existing account to be sure they are still earning a reasonable return.
“Switching quickly is crucial if savers want to get the most lucrative rates and providers will need to act swiftly to cope with demand and keep a close eye on their peers positioning themselves in the top rate tables.”
Where to put your cash
Fixed-term bond rates have remained competitive despite the Bank cutting the base rate.
Since the Bank cut, two-year fixed rate bonds have fallen from an interest rate of 1.23% to 1.12%, according to Moneyfacts.
This compares to the average two-year Cash Isa rate, which has fallen from 1.19% to 1.01%.
Fixed-term deals pay out after an agreed length of time and can help guard against any economic shocks or further interest rate changes.
The current top one-year fixed-term bond is from Vanquis Bank at 1.6%. Vanquis Bank also has the highest-paying three-year bond at 1.8%.
Both require an initial £1,000 deposit and can be opened and managed online.
The top-rated easy-access five-year bond is from Gatehouse Bank at 2.00%. This can be opened and managed online with a deposit of £1,000.
Gatehouse Bank is an Islamic bank and pays an expected profit rate instead of interest for religious reasons. While the rate is not guaranteed, no Islamic savings deal in this country has ever failed to pay the advertised rate.
Marcus from Goldman Sachs is the current best buy easy access account at 1.2%. You can open and manage this account online with a deposit of £1.
The highest paying easy access Cash Isa is from Shawbrook Bank at 1.25%. This can be opened and managed over the internet, with a deposit of £1,000.
If you are prepared to lock your money away you can get a higher rate with Shawbrook Bank’s three-year Cash Isa, which pays 1.52%. This account can be opened and managed online with a £1,000 deposit.