UK saving rates have hit record lows as a range of savings accounts – including easy-access, fixed-rate and Isas – now pay an average interest rate of less than 1%.
The average easy-access rate is now 0.24%, according to the Moneyfacts UK Savings Trends Treasury Report, which looks at the range of accounts across the British savings market. As recently as January the average easy-access rate was 0.59%.
Today, there are multiple accounts which pay 0.01% to customers.
The report found that banks and financial institutions have also cut back on the volume of savings products, while the trend of falling rates is likely to continue.
The number of UK savings accounts on the market, including Isas, has fallen to 1,398, the lowest amount since 2007.
The Bank of England cut rates twice in March, coming down from 0.3% to 0.1%, the lowest in the central bank’s 325-year history, to bolster the economy at the height of the coronavirus outbreak. Savers have suffered rock-bottom interest rates since the 2008 financial crisis.
Rates across a range of savings accounts have fallen since the start of the year.
The average longer-term fixed-rate bond has fallen by 0.56% since January, falling from 1.48% in January 2020 to 0.92% in July.
While the average longer-term fixed Isa rate, which fell by 0.57%, falling from 1.37% in January to 0.8%.
Savers looking to lock into a short-term account will have seen that the average one year fixed-rate bond has fallen by 0.5%, from 1.2% in January to 0.7% in July, and the average one year fixed rate Isa has seen an even bigger fall of 0.54%, from 1.15% in January to 0.61% in July.
High-paying accounts oversubscribed
Since the start of March, 370 options have disappeared from the market. This includes the withdrawal of Goldman Sachs’ easy-access savings account to new customers through its Marcus digital operation in June.
The account attracted about £21bn from more than 500,000 savers since its launch in 2018, initially offering a 1.5% rate, which had fallen to 1.05% in May of this year.
UK banking rules mean that retail deposits of more than £25bn must be ring-fenced, which led Goldman Sachs managers in the UK to close the account as it neared that threshold.
Moneyfacts savings experts Rachel Springall said banks which offered higher than average savings accounts were often flooded with funds, forcing them to withdraw accounts or reduce their rates.
Springall said: “It is imperative that savers act quickly to take advantage of the top rates as providers are repricing deals rapidly.”
British households have boosted their savings during three months spent in lockdown, setting aside cash they might have spent on commuting or meals out.
Deposits into accounts by British households increased by a record £25.6bn in May, following strong increases in March of £14.3bn, and April, £16.7bn, according to the Bank of England.
Despite falls in average savings rates, 12% of consumers set up a new savings account since the start of the health crisis, of these 70% chose cash-based savings over stocks and shares investments, according to insurer Aegon.
Moneyfacts’ Springall said: “Overall, the outlook for the savings market appears uncertain and providers will need to continue to adjust their market position if they are dealing with an influx of deposits. As it stands, savings providers may be reaching their desired subscription levels quicker than they expect, particularly if savers put away additional disposable income amassed during lockdown.”