You are here: Home - Saving-Banking - News -

Emergency interest rate cut: savers must shop around now for best deals

0
Written by:
11/03/2020
Savers should be actively shopping around for the best deals in preparation for “inevitable” rate cuts in the coming weeks, experts say.

Rates on savings accounts have been dire in recent years but are likely to fall further in response to today’s emergency interest rate cut by the Bank of England.

The Bank slashed rates from 0.75% to 0.25% this morning in an attempt to support businesses and the economy in the wake of the coronavirus outbreak.

It also announced a new £100bn Term Funding Scheme to encourage banks to lend to businesses. This means more cheap money from the government so banks won’t need to attract cash from savers by offering better rates.

Experts described the moves as “devastating news” for savers.

Anna Bowes, co-founder of website Savings Champion, said: “We do recognise that these are extenuating circumstances, so a cut in the Bank of England base rate could be a vital move to keep the economy moving and to support businesses – along with other measures to help small and medium sized enterprises.

“That said, today’s announcement that interest rates have been cut is devastating news for savers who have lived with record low savings rates for over a decade.

“Savers have seen cuts to both the best buy and existing savings accounts accelerate over the last couple of months in particular, even though no base rate cut has happened until today.”

Just yesterday, Atom Bank cut the rate on its market-leading one-year bond from 1.6% to 1.5%.

Cuts are the norm

Data from rate monitoring site Moneyfacts shows just how far savings rates have fallen in in recent months.

The average easy access account today pays just 0.56%, a significant drop from 0.64% in January 2019, while the average notice account offers 1.03%, down from 1.09% last January. ISAs have fared even worse, with the average easy access rate down to 0.84% from 0.94%.

Rachel Springall, finance expert at Moneyfacts, said: “As we have seen in just the past 12 months, competition is stagnating, and it has become the norm to see providers cut rates to adjust their market position rather than launch headline-grabbing deals.

“It almost seems inevitable at this stage that the base rate reduction could get passed on in full to savers over the next few months, but this then should be a signal for savers to shop around for a new deal.”

Don’t settle

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said savers don’t have to settle for the “increasingly miserable rates” on offer from the high street giants.

“You can get significantly better rates by shopping around with newer banks, Sharia banks and building societies – whose rules mean they’ll still try to balance the needs of their borrowers and their savers.”

Yorkshire Building Society currently pays the top easy access rate of 1.32%, however withdrawals are limited to once a year.

If you want unlimited withdrawals, you can get 1.31% from Cynergy Bank, which includes a bonus of 0.56% for the first 12 months.

The best one-year fixed rate bond deal is from Ikano Bank, paying 1.56%. The Swedish bank also pays the best two-year fixed rate of 1.66%.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and for anyone travelling today Friday 3 Febru...

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

How to help others and donate to food banks this winter

This winter is expected to be the most challenging yet for the food bank network as soaring costs push more pe...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week