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The Moneyfacts UK Savings Trends Treasury Report reveals that average savings rates have fallen for the fifth consecutive month. Since the start of March, the impact of the Coronavirus and subsequent base rate cuts have seen average returns plummet. Easy access accounts, have halved, from 0.56% in March to 0.22% this month.
Since March 2020, average savings rates for easy access, notice accounts and their ISA equivalents, as well as one-year fixed ISAs, have halved, with one-year fixed bonds, longer-term fixed bonds and longer-term fixed ISAs reducing by at least a third.
All average savings rates are at their lowest point since our electronic records began in 2007, as notice accounts have now hit a record low this month.
|Savings market analysis – average rates|
|Average easy access rate||0.56%||0.24%||0.22%|
|Average easy access ISA rate||0.83%||0.37%||0.32%|
|Average notice rate||1.00%||0.54%||0.48%|
|Average notice ISA rate||1.13%||0.60%||0.52%|
|Average one-year fixed rate bond||1.15%||0.70%||0.63%|
|Average longer-term fixed rate bond*||1.37%||0.92%||0.84%|
|Average one-year fixed rate ISA||1.14%||0.61%||0.56%|
|Average longer-term fixed rate ISA*||1.29%||0.80%||0.75%|
|*Longer-term fixed bonds or ISAs are those with terms over 550 days. Average interest rates based on a £5,000 deposit as at the start of the month. Source: Moneyfacts Treasury Reports|
|Savings market analysis – product count|
|Product numbers and rates||Mar-20||Jul-20||Aug-20|
|Number of live savings account options (excluding ISAs)||1,351||1,081||1,083|
|Number of live ISA options||417||317||319|
|Source: Moneyfacts Treasury Reports|
Rachel Springall, Finance Expert at Moneyfacts, said:
“As the UK enters a recession for the first time in 11 years, consumers may be looking to put aside some cash for an emergency fund in response. Since the UK lockdown, savings rates have plummeted to record lows across the board, so prospective savers may be disheartened with the current rates on offer.
“The impact of the Coronavirus pandemic and subsequent base rate cuts has caused a rate-cutting trend among savings providers and while this is expected to slow down, there are few signs of the market making a U-turn any time soon. Choice is also limited, and despite a small rise to the number of savings account options including ISAs month-on-month, there are 366 fewer options than there were at the start of March 2020.
“Challenger banks may still attempt to entice new savers over the short-term to fund their future lending – proven in recent weeks by one-year fixed bond competition in the top rate tables – but it is unknown whether this will continue over the coming months. The average one-year fixed bond rate has fallen by more than a third since the start of March, so even if a few deals improve, there will need to be a market-wide movement to return to the rates seen pre-lockdown.
“Savers are clearly turning to flexible vehicles to have their cash close at hand, according to deposit data from the Bank of England. Since January, over £50bn flowed into interest-bearing sight deposits, which includes easy access accounts. As it stands, the top rate deal for easy access accounts comes from NS&I, as its presence is to draw in funds to meet Government targets. Average rates for easy access accounts continued to fall this month to a new low of 0.22%, with many of the biggest high street banks paying as low as 0.01%.
“As more cash could flood the savings market, providers will need to act quickly to cope with demand and they could pull offers entirely if subscription levels fill too quickly, but this could well lead to a domino effect of other providers following suit. Savers who may wish to put away any disposable income amassed during lockdown will need to act quickly or be left disappointed.”
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