Worst six months for savers in more than a decade
Savers are being urged to act and switch if they are getting a poor return on their hard-earned cash as the average rate on an easy access savings account falls to just 0.24%.
In January 2009 the average easy access rate stood at 1.55% but by June the same year, it had fallen to 0.7%, according to Moneyfacts. In January 2020 the average rate was just 0.59% – more than double the average rate now.
Savers looking at fixed rates will also find they have fallen significantly over the past six months, with average rates having fallen by the largest proportion over the first half of any year since 2009.
The typical rate paid on a one-year fixed rate bond now stands at 0.71%, compared to 1.2% in January 2020, and 3.49% in January 2009.
Rachel Springall, finance expert at Moneyfacts.co.uk, says: “Savers will be in for a shock to find the first six months of 2020 have been the worst for rate cuts in over a decade. Indeed, all average rates have fallen between January and June this year, but the falls are the largest we have seen since 2009, after the financial crash. This demonstrates how much the market has been impacted by the coronavirus pandemic and base rate cuts, and it will leave savers feeling frustrated and disappointed.”
Moneyfacts warns that savers could be earning as little as 0.01% if their money is in an easy access account with some providers, including NatWest.
The best easy access rate is 1.15% from National Savings and Investments (NS&I). On a £20,000 deposit, that is a difference in interest over 12 months of £228.
If savers were looking to lock their cash away over the next 18 months, then the best deal comes from Bank of London and The Middle East (BLME), paying 1.15% as an expected profit rate, which is 0.44% more than the average rate.
Springall adds: “If savers are looking for a decent return but do not wish to lock their money away for a year or more, then a notice account could be a good bridge between fixed and easy access accounts. One example of a deal with a short notice term is ICICI Bank UK’s 45-day notice account, which pays 1.24% gross monthly and is available through Raisin UK.
“It is imperative that savers act quickly to acquire the top rates on the market regardless of which type of savings account they choose, as there seems no end to the downward trend.
“Due to the uncertainties that the coronavirus pandemic has instilled, it is more important than ever before for consumers to build up an emergency fund that they can dip in to should they run into any financial difficulties in the months to come.”