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Savings deals pulled at fastest rate on record

Paloma Kubiak
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Paloma Kubiak

The coronavirus pandemic coupled with the March base rate cuts means savings deals are vanishing at speed with some easy access accounts offering just 0.01% on a £10,000 deposit.

The savings market has endured the largest pull of products month-on-month on record, according to data site Moneyfacts.

Easy access accounts are already feeling the effects of the two Bank of England base rate cuts last month, coupled with the Covid-19 pandemic.

In fact, the average easy access rate fell from 0.56% in March to 0.51% at the beginning of April, and stands at just 0.44% today.

NatWest has today joined the likes of Halifax, Lloyds Bank and Scottish Widows Bank, which pay just 0.01% based on a £10,000 deposit following cuts to rates in March.

Ordinarily, the new tax year ISA season is much-anticipated but Moneyfacts said it quickly fizzled out as fewer providers are offering fewer products.

Its data revealed that at the start of March there were 90 ISA providers offering 417 accounts, by the end of the month, there were 86 providers offering 340 products, a fall of almost a fifth of the market.

Rachel Springall, finance expert at Moneyfacts, said savers will be disappointed to find that deals are being pulled left, right and centre. For providers, they are pulling deals because they have crept up the top rate tables unexpectedly, resulting in a domino effect of cuts or withdrawals.

She said: “We have not seen such sights since 2012, and this stark drop in savings products echoes when the Funding for Lending Scheme took its toll on the savings market – whereby providers no longer felt the need to rely on their savings deposits to fund their future lending. The Term Funding Scheme, which came into being in 2016, and the most recent Term Funding Scheme with additional incentives for SMEs scheme (TFSME) launched last week will no doubt continue the legacy of a less competitive savings market for the next four years, as providers are able to borrow cheaply from the government.”

Springall added that in light of this ‘savings market trauma’, it has never been so vital for savers to take stock of their existing account to be sure they are still earning a reasonable return.

“Switching quickly is crucial if savers want to get the most lucrative rates and providers will need to act swiftly to cope with demand and keep a close eye on their peers positioning themselves in the top rate tables,” she said.