Savers have had it tough in the last few years, and unfortunately, there's no sign of things changing in the near future. Instead, our latest figures show that average savings rates have fallen further this month with many reaching fresh lows, as ISA season wholly fails to materialise and competition becomes non-existent.
The figures, from the latest Moneyfacts UK Savings Trends report, show that the fixed sector of the market has been the hardest hit for the third consecutive month. Indeed, 34% of the 86 providers who offer fixed rate bonds have made rate reductions in the last month, while 25% of the 48 providers offering fixed cash ISAs did the same.
As a result, the average one-year fixed rate fell by 0.04% to 1.23%, while the long-term rate fell by an even more significant 0.09% to 1.69%. It's a similar picture in the ISA sector, with the average one-year ISA rate down by 0.05% (to 1.26%) and the long-term equivalent down by 0.08% (to 1.52%), with rates across all fixed markets now being the lowest ever recorded.
The variable sector also experienced rate cuts with all averages falling during the month, albeit to a lesser extent: the average notice account rate fell by 0.02% to 0.79%, last recorded in March and one of the lowest rates seen, while its no notice counterpart fell by 0.03%. This means that it's now hit a record low of 0.58%, and marks the first time that the average no notice rate has dropped below 0.60%.
The variable ISA sector hasn't escaped cuts either, with providers continuing to withdraw products and replace accounts with those paying reduced rates. This has resulted in both the average no notice and notice cash ISA rates falling by 0.02% to stand at 1.03% and 1.14% respectively, which means that both have again reached new lows.
Quite simply, it isn't looking good, and the fact that rates have fallen across the market suggests that the level of apathy among providers has become stronger still. Competition has stalled in every area, and even challenger providers, who at one time were thought of as the saviours of the savings market, have been unable to sustain their previous level of competition.
The desire for savers' cash just isn't there, something that's largely due to the fact that the savings market has become awash with too much money that providers neither want nor need. The pension reforms of last year and maturing NS&I pensioner bonds mean that many savers are now looking for new places to squirrel away their money, but as providers don't want it – they already have sufficient reserves – they've had no option but to reduce rates.
It doesn't stop there, either. Other factors driving the savings downturn include the impact of the recently-implemented personal savings allowance, which is having a particularly keen effect on the ISA sector and has led to the worst ISA season on record, as well as rising uncertainty around the future economic situation.
This can be particularly seen with regards to base rate, with many people now talking about a potential cut to base rate, rather than a rise. Unfortunately, this opens up the possibility for savings rates to reduce even further in the months ahead, so if you're looking for a new savings account, it could pay to invest sooner rather than later!
Average rates may be falling, but there are still some good deals out there. Check out our savings best buys to get started.
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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