Third of easy access accounts pay less than 0.25%
Beleaguered savers were hit with the news last week from the Bank of England Governor Mark Carney that the base rate is unlikely to rise in the short-term.
The base rate fell to 0.25% in August 2016 and it’s been below 1% since March 2009 – meaning savers have had to endure nearly 100 months of record low interest rates.
For those who keep their cash sitting in easy access accounts, a third now pay less than the 0.25% rate.
Only 10% of the easy access accounts available on the market now pay a rate of 1% or more, down from 31% a year ago and 49% of accounts five years ago, according to data from Moneyfacts.
The table below shows the number of easy access accounts paying less than 0.25% and more than 1%:
|Proportion of easy access accounts in the market offering specific rates||Jun-12||Jun-16||Today|
|Easy access accounts paying 1% or more||49%||31%||10%|
|Easy access accounts paying less than 1%||51%||69%||90%|
|Easy access accounts paying 0.25%||7%||8%||13%|
|Easy access accounts paying less than 0.25%||25%||22%||34%|
As 80% of easy access accounts haven’t been switched in the last three years alone, savers may well be losing out on the best possible rate if they don’t compare and move to something better.
Rachel Springall, finance expert at Moneyfacts, said savers have been facing a never-ending battle to get a decent return on their cash over the past few years.
“Government lending initiatives and consecutive cuts to bank base rate have resulted in savings rates plummeting. To add insult to injury, the governor of the Bank of England’s view is that there will not be a rise to interest rates in the foreseeable future as ‘now is not yet the time’ to raise the base rate.
“There is a fundamental flaw in the savings market, with a distinct lack of competition among the biggest banks for savers’ cash. Easy access accounts are one of the most popular methods of saving and so it’s devastating that 90% of them don’t even pay a 1% interest rate.”
Springall added that savers not proactively monitoring their savings accounts could be earning next to nothing.
“This is why it’s so worrying that in the last three years, 80% of easy access accounts have not been switched. Still, it’s difficult to blame savers for their apathy when rates remain so low.
“These are testing times and savers who are frustrated with earning very little in cash might turn to alternative investments. For example, the average return on cash ISAs over the past year was just 0.97%, while over the same period the average stocks and shares ISA returned growth of 16.5%. It’s worth remembering though that past performance is no guarantee for the future and not everyone will be prepared to take the risk.”