Coronavirus pandemic causes savings market to deteriorate
Savers are struggling to find decent returns as rates plummet to the lowest level on record.
The average easy access rate has dropped to a historic low of 0.3%, down 0.29% from January 2020, according to Moneyfacts, the financial researchers.
Similarly, the average interest on a one-year fixed rate bond fell to 0.86% this month, down from 1.2% at the start of the year.
Isa savers also face dismal prospects, with the average easy access Isa paying 0.45%, 0.4% less than six months ago.
The table below shows how interest rates on savings accounts have fallen since January 2020.
|Average easy access rate||0.59%||0.40%||0.30%|
|Average easy access Isa rate||0.85%||0.63%||0.45%|
|Average notice rate||1.03%||0.89%||0.69%|
|Average notice Isa rate||1.12%||0.89%||0.69%|
|Average one-year fixed rate bond||1.20%||0.99%||0.86%|
|Average longer-term fixed rate bond*||1.48%||1.18%||1.05%|
|Average one-year fixed rate Isa||1.15%||0.91%||0.75%|
|Average longer-term fixed rate Isa*||1.37%||1.07%||0.93%|
*Longer-term fixed bonds or Isas are those with terms over 550 days. Source: Moneyfacts Treasury Reports
The number of savings products available has also dropped to its lowest level since February 2007, as providers withdraw deals.
Currently, there are 1,133 savings deals on the market (excluding Isas), down from 1,388 in January 2020.
Why are savings rates so low?
Most savings providers began to slash interest rates on their accounts following the Bank of England’s decision to reduce the base rate twice this year to 0.1%, its lowest level in history.
This coupled with continued uncertainty surrounding the coronavirus pandemic has caused the UK savings market to deteriorate rapidly since the beginning of the year.
Rachel Springall, a finance expert at Moneyfacts, says: “It is clear to see that the coronavirus pandemic and subsequent base rate cuts have had a catastrophic impact on the savings market.
"Providers are facing an influx of deposits and need to quickly manage the flow of cash by adjusting the rates in their range or withdrawing their lucrative offers entirely.”
Savers are encouraged to act quickly to secure a good savings deal before it disappears.