Savings accounts fail to keep pace with 0.5% base rate
The Bank of England cited weakening economic data as the reason for keeping rates at 0.5% in its May meeting. However, Moneyfacts UK Savings Trends Treasury Report data reveals that the number of accounts paying over base rate has dropped by 77% since the rate rose to 0.5% in November 2017.
In November 2017, 77% of savings products paid over base rate, in line with the previous year. However, just 72% pay over base rate today, suggesting that savings products are not keeping pace with interest rate rises.
Charlotte Nelson, finance expert at Moneyfacts, said: “Savers will be disappointed that the expected base rate rise was put on hold last week. However, they will be even more shocked to find that since the last time the Bank of England increased rates back in November 2017, the number of accounts paying above base rate has fallen.
“While base rate has returned to 0.50%, the savings market has yet to recover from the rate cut almost two years ago. This is also reflected in the average easy access rate, which is yet to return to its pre-cut levels; it stands at 0.49% this month, compared with 0.54% in August 2016.
Nelson said the figures show some providers either didn’t pass on the rate rise in November, or only increased rates by such a small amount that it had little effect. The exception was in non-ISA fixed rate products, where the average rate increased for the third month running to reach its highest level in two years. This is predominantly fuelled by challenger banks boosting competition.