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Cash savings grow at lowest rate in a decade

Paloma Kubiak
Written By:
Paloma Kubiak

The annual growth in cash savings came in at 1.4% for April, the lowest rate in more than 10 years, statistics reveal.

This figure is down from the 1.8% reported in the year to March, and 1.9% in the year to February.

Before that, the annual growth rate had only fallen below 2% twice since the figures were first published in October 2007, according to UK Finance.

Savers are choosing to keep more of their money in easy access accounts as £6.35bn was held there in April, compared to £2.08bn in fixed rate and notice accounts.

ISA cash deposits across the high street banks saw a slight increase on the previous month to coincide with the end of the tax year (£1.57bn total in April). And card spending was 9.8% higher than a year earlier.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said miserable interest rates on the high street continue to blunt enthusiasm for cash saving.

“In some parts of the market, savers are giving up entirely, with a 6% drop in the cash in fixed rate and notice accounts and a 5% fall in cash ISA savings over the year.

“Cash ISA savings have been ravaged by the introduction of the £1,000 tax free savings allowance for basic rate taxpayers. Many savers just don’t see the point of cash ISAs anymore – particularly when the rates on the equivalent savings accounts are higher. Of course, they may feel very differently when rates rise, they build up substantial savings, or they move tax brackets and suddenly find themselves paying tax on their savings, but for now, cash ISAs are in the doldrums.”

Turning to fixed rate savings accounts, Coles said many pay below 1% so savers “don’t see the point in tying up their money”.

“We can only hope these figures also contain a good proportion of people who are sick of lower rates on the high street and are taking their cash to work harder in the challenger banks that don’t show up in these figures.

“At the moment, the challenger banks are stepping up their game in the one-year fixed market in particular, so you could get an ‘expected profit rate’ of 2% or interest of 1.95%.”

Coles added that at a time of low interest rates, shopping around for a competitive fixed rate for a period that suits you is “one of the best ways to make your cash work as hard as possible”.

Related: See our The savings accounts to beat inflation and ‘Should I move my lower paying cash ISA to a top fixed savings deal?’ for more information.