It’s official. August was the worst month for savings rates
The data firm recorded just three rate increases last month but a staggering 388 rate falls, with some deals plunging by as much as 1.30%.
These rate cuts have pushed savings rates to new lows. The average five-year fixed rate bond has fallen from 2.64% to 1.66% in one year, while the average easy access ISA has dropped from 1.12% to 0.82% in the same period.
Savers have had to contend with years of poor returns but the Bank of England rate cut in August from 0.5% to 0.25% added to their woes.
“Some of the rate cuts made during August were well over what was initially expected, with some deals cut by as much as 1.30% – over five times the base rate cut,” said Rachel Springall, finance expert at Moneyfacts.
“These higher cuts have not gone unnoticed, as the Financial Conduct Authority are to investigate what lenders are passing on to borrowers and what cuts are being made to savings rates.”
But it’s not just rate cuts causing problems for struggling savers. Some of the best deals have been withdrawn so that providers can cope with demand.
A total of 20 top ten deals have vanished since the start of August, according to Moneyfacts.
However, there was a glimmer of good news with inflation last month remaining static at 0.6%, which means savers have little to worry about in terms of savings erosion.
The vast majority of the 661 savings accounts currently on the market can beat or match inflation.