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Savers need to fix now before 6% rates drop or disappear altogether

Savers need to fix now before 6% rates drop or disappear altogether
Rebecca Goodman
Written By:
Rebecca Goodman
Posted:
17/10/2023
Updated:
17/10/2023

There are now a handful of accounts offering 6% or more and one investment firm is warning savers to fix now before these disappear altogether.

It’s been almost two weeks since the market leading account, which paid 6.2% from National Savings and Investments (NS&I), was pulled. Nearly a quarter of a million savers opened one of these accounts from the Government’s savings arm.

Since then, six providers have cut the rates they offer and this week could be the last to secure an account paying 6% or more, warns Hargreaves Lansdown.

The pattern of lower interest rates follows on from the Bank of England (BoE)’s latest decision to hold interest rates. Until this happened, providers had been steadily increasing the interest they offer on accounts.

Yet is it expected that the BoE may raise rates one last time and this could see providers reacting by upping the rate of interest they pay.

Providers withdrawing accounts or dropping rates

The firm said the drop in the rates offered has become a trend and several building societies yesterday withdrew fixed-rate products.

These include a three-year fixed-rate account from Buckinghamshire Building Society, a one-year ISA from Chorley Building Society, and several from Family Building Society. All of the fixed-rate ISAs from Sainsbury’s Bank have also been removed.

Several providers have also lowered the rate of interest they pay, including Al Rayan Bank, which reduced 0.16% from its 12 and 18-month accounts. At Hodge Bank, rates fell by 0.44%, and, at Virgin Money its one-year fixed-rate E-ISA now pays 5.70%.

The market-leading one-year account currently pays 6.11% from Union Bank of India (UK) and there’s also an account from Ahli United Bank (UK) plc via Raisin UK which pays 6.10%. There are seven accounts paying 6% or over.

For cash ISAs, the best rate at the moment comes from Virgin Money with its one-year fixed-rate account paying 5.85% but it’s only available to new or existing customers of the bank. Charter Savings Bank also has a one-year fixed-rate ISA, paying 5.72%.

‘6% rates are numbered’

Mark Hicks, head of savings for Hargreaves Lansdown, said: “The days of 6% rates on 1-year fixed products are numbered. It is possible there will be no more of them left on the market by the end of the week. What started off as a trickle of withdrawals last week has now turned into more a trend, with multiple banks and building societies removing products from the savings market.

“This is particularly focused on fixed-term products, as a result of the withdrawal of NS&I’s fixed rate of 6.2% – its best-ever savings bond. The wall of cash that was going towards NS&I has now moved to the next best products in the market and with a lot of those names being smaller providers, they are disappearing very fast.

“Whilst the easy access market has been relatively unaffected so far, this could certainly now be the last chance to fix before rates start to move lower. We have already seen 6% rates disappear from the longer-dated fixed term market and now could be your last chance to fix before they disappear from 1-year fixed term products.”