Little more than half the savings market can beat base rate

Little more than half the savings market can beat base rate

11:48 AM, 15th March 2022, About 2 years ago

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Base rate beating savings deals plunge to lowest level in over a decade with the Moneyfacts UK Savings Trends Treasury Report data showing little more than half of the savings market (55%) can beat base rate, despite an uplift to savings rates month-on-month. This is before we get the next expected interest rate increase by the Bank of England.

The number of savings accounts that can beat the Bank of England base rate (912) has plummeted to its lowest count since November 2008 (904), and the first time the count has dropped below 1,000 since January 2009. The percentage of accounts paying above base rate is now 55%, a significant drop of 12% a month ago, and is the biggest percentage fall since records began in 2007.

Product choice overall has grown by 269 deals year-on-year, to 1,654 savings deals (including ISAs). ISA product choice has grown year-on-year by 68 deals to 399.

The average easy access rate rose to 0.25%, its highest since June 2020 (0.30%) and the average notice rate rose to 0.56%. The easy access ISA rate rose month-on-month to 0.30%, its highest point since November 2020 (0.31%) and the average notice ISA rate also rose to 0.38%, the highest point since February 2021 (0.40%).

The average one-year bond rate rose month-on-month to 0.89% and is at its highest since May 2020 (0.99%) and the average one-year fixed ISA rose to 0.72%, its highest point since June 2020 (0.75%). The average long-term fixed bond rate rose to 1.31%, the highest since March 2020 (1.37%) and the longer-term fixed ISA rate rose to 1.12%, its highest point since April 2020 (1.15%).

Savings market analysis – average rates
  Mar-20 Mar-21 Feb-22 Mar-22
Average easy access rate 0.56% 0.16% 0.21% 0.25%
Average easy access ISA rate 0.83% 0.23% 0.26% 0.30%
Average notice rate 1.00% 0.37% 0.54% 0.56%
Average notice ISA rate 1.13% 0.34% 0.37% 0.38%
Average one-year fixed rate bond 1.15% 0.43% 0.82% 0.89%
Average longer-term fixed rate bond* 1.37% 0.65% 1.22% 1.31%
Average one-year fixed rate ISA 1.14% 0.38% 0.59% 0.72%
Average longer-term fixed rate ISA* 1.29% 0.59% 1.04% 1.12%
*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
Mar-20 Mar-21 Feb-22 Mar-22  
1,351 1,054 1,223 1,255  
417 331 379 399  
Source: Moneyfacts Treasury Reports

Rachel Springall, Finance Expert at Moneyfacts, said:

“The savings market is experiencing a positive uplift to rates and there now appears to be signs of a possible ISA season this year. However, many savers will find they are unable to beat the Bank of England base rate as there remains to be many deals incapable of outpacing 0.50%. Despite encouraging signs of rates rising, there is clearly much more room for improvement for cash savers, but it could take a few months yet before consumers will see a base rate rise passed onto them, but there is no guarantee this will even come to light.

“One of the most popular savings vehicles is undergoing a spate of competition, as easy access accounts are now, on average, paying the highest rate seen since June 2020. However, back in March 2020, the average easy access account returned 0.56%, which is more than double the current return of 0.25%. Before the UK lockdown, base rate stood at 0.75%, and with base rate expected to climb beyond the present rate of 0.50%, savers will no doubt be curious as to whether we could see interest rates return to pre-pandemic levels, but this does seem farfetched.

“Those savers who are looking to take advantage of a guaranteed cash return over the next year or more will be pleased to see fixed rates rising, with the average one-year bond rate standing at 0.89%, its highest level since May 2020, which may well hit 1% in the months to come should competition continue in the sector, considering the average rate was 0.67% just six months ago. Whether savers are content to lock their cash away for the longer-term is debatable due to the current economic environment, but the average longer-term fixed rate has reached a pre-pandemic high (March 2020). Savers comparing fixed bonds to ISAs are wise, as while we are seeing rates rise across the ISA market, consumers could find more lucrative rates on deals outside of an ISA wrapper and still can earn their interest tax-free if they stay within their Personal Savings Allowance.

“Savers are still putting their cash away in easy to access accounts, as during the month of January, inflows to sight deposits grew, but inflows to time deposits fell, according to the Bank of England. Cash ISA outflows continued in January, but seasonably, over the past two years at least, deposits to Cash ISAs can rise, so we may see the consecutive outflows from Cash ISAs cease now that the ISA market is moving in the right direction. Those savers seeking the best rates must keep a close eye on the top rate tables as competition is rife.”

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