Short-term savers see rate cuts
The average interest rate on instant access savings accounts has dropped from 3.76% to 3.3% since the beginning of the year, MoneyExpert has revealed.
The financial comparison has found nearly 300 savings accounts pay less than 2% interest and many banks and building societies are cutting rates, despite efforts to attract cash to fund mortgage lending. As a result, the number of accounts paying more than 5% (the current Bank of England Base Rate) has decreased from 270 to 145 over the last six months.
According to MoneyExpert, these findings reflect efforts to attract long-term savings to help improve liquidity levels, rather than short-term accounts that don’t lock in savers’ money. Many banks and building societies are instead boosting rates on bonds and other long-term products instead.
Sean Gardner, director of MoneyExpert.com, explained long-term savings are more attractive to banks, especially at the moment because they want to know they have money to play with and can’t afford to offer as good deals to attract short-term savings that can be withdrawn without penalty at a moment’s notice.
“This explains why there are still some great deals on offer in regular savings and fixed-term bonds. Anyone who has some cash set aside could benefit significantly,” he added.
Analysis from MoneyExpert revealed there are currently 1,501 instant access savings products on the market. However Gardner warned consumers with instant access accounts to watch their rates carefully, as they can fluctuate and around 299 accounts pay less than 2% interest.
He concluded: “Thankfully it’s free to switch accounts so if you’re in any doubt, compare other offers and see if you can get a better deal elsewhere. It’s a saver’s market so don’t accept a bad rate.”