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%.