UK Savings Interest Rates Fall to Record Lows

By: MoneyFacts

Data from Moneyfacts.co.uk can reveal that rate reductions in the savings market have now outweighed rate rises for nine consecutive months.

In June, Moneyfacts recorded just 14 savings rate rises. Disappointingly, rate reductions over the same period completely outshone this figure, with the number of rate decreases standing at a staggering 117, with some deals falling by as much as 1.30%.

While this is certainly bleak news, at least savers’ precious funds won’t be greatly affected by inflation: inflation statistics released today show that the Consumer Prices Index (CPI) rose from 0.3% to 0.5% during June, which means savers have little to worry about in terms of savings erosion. Unsurprisingly, the vast majority of the 770 savings accounts currently on the market (593) can beat or match inflation, and of these 525 * (88 no notice, 52 notice, 209 fixed rate bonds and 176 cash ISAs) are without restrictive criteria.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:        

“Despite the Bank of England choosing to keep base rate static at 0.50%, savers are still faced with the prospect of savings cuts outweighing the number of rate rises in the market, making many wonder when the misery of poor returns will ever end.

“As a result of these rate cuts, Moneyfacts.co.uk has seen all average savings rates fall to the lowest on record. For example the average five-year fixed rate bond has fallen sharply from 2.54% to 2.00% in just one year. ISAs have not been left untouched either, with the average ISA rate falling from 1.45% to 1.14% over the same period.

“With 59% of all cuts falling at the fixed rate bonds’ door, savers will be extremely disappointed: these accounts offer savers some of the better deals on the market, but, with low SWAP rates and market uncertainty, these rates have dropped dramatically.

“Back in March 2009 the top easy access account paid 3.94% yearly, but today’s savers will be unable to achieve anywhere near such a rate. In fact, savers would have to opt to fix for seven years to get the top deal in the market, which at 2.35%, is a whopping1.59% lower.

“Mark Carney’s announcement on Thursday is unlikely to make the life of the cash saver any easier. With uncertainty ahead, savers need now more than ever shop around to get a good deal, and may want to look non-traditional options such as current accounts to make their money work harder, too.”

Data Note* Please note that the savings product numbers only include deals that are available to all UK residents. Moneyfacts has chosen not to include products that have limited access, such as locals-only, high net-worth clients or linked products, which mean you must have an existing account to obtain headline rates. Moneyfacts has taken the view that as these accounts are not available to your entire readership, their inclusion may be misleading to your readers by directing them to accounts they may not be entitled to. We do, of course, hold all of this data should you require it. Our daily Moneyfacts savings rate monitoring started in July 2015 and is a record of live standard savings account changes, which include fixed rate bonds of all terms, all ISAs, notice accounts and no notice accounts.

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