Our latest research reveals that the Bank of England's decision to cut the base rate has had a devastating effect on the state of the savings market in August, making it the worst month of the year so far for cuts. A total of 354 cuts have been recorded this month, compared with just three rate increases. This works out as 118 cuts for every rate rise, and means that savers, who have in general not had much luck this year finding truly inspiring deals, now have even less to be cheerful about.
Deep cuts abound
Data further shows that 53 of the cuts were larger than the base rate cut of 0.25%, with some providers decreasing their rates by as much as five times that. For example, United Bank UK cut its seven-year bond from 2.12% to 0.82%. Not only that, but in line with previous reports, 20 best buy deals (those in the top 10 of their sector) have been completely withdrawn from the market.
For anyone looking back at previous years' rates with a sense of fond nostalgia, the table below shows that the majority of average rates do now indeed pay half of what they did five years ago. While this may give some hope that things could look quite different again in five years' time, the immediate future isn't looking too positive. Rachel Springall, finance expert at Moneyfacts, has warned: "Despite an onslaught of cuts being made during August, savers would be wise to brace themselves for more cuts to come, particularly to best buy deals where providers may struggle to cope with demand."
The long view
Rachel pointed out that "rates were already at appalling lows long before the Bank of England slashed base rate to 0.25%. Consecutive years of Government lending initiatives meant that the banks lacked a desire for savers' deposits, resulting in an obvious lack of competition in the market."
So while the Bank of England's rate cut is not the only reason why providers are slashing prices, it certainly hasn't helped. This means it is more important than ever to do your homework and find the savings account that works best for your needs.
Some might consider switching to a stocks & shares ISA, which still has the potential to provide decent projected interest rates over the longer term. Alternatively, those looking to invest their savings into a more stable pot can still find good deals as long as they are willing to do some research. Just don't forget to strike while the iron is hot, before the deal of your choosing disappears!
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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