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Suffering goes on for short-term savers

Suffering goes on for short-term savers

Category: Savings

Updated: 29/03/2012
First Published: 29/03/2012

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

More than three years on from the base rate of interest hitting its historical low, short-term savers continue to feel the pinch, research from Moneyfacts.co.uk has found.

The combination of the record low 0.5% base rate and inflation way above the Government's 2% target have conspired to hit short-term savers in the pocket.

In fact, savers looking to save their funds in a one year bond are now offered meaner rates of interest than was the case three years ago.

Whereas in March 2009, the average one year fixed rate bond paid 2.78%, today the accounts pay an average of 2.75% - a fall of 0.03%.

Similarly, the average cash ISA now pays more miserly rates, down from 1.99% to 1.91%.

And while there are many savings accounts offering an introductory bonus, after this expires the accounts can pay less than base rate, so reviewing their competitiveness is vital.

By contrast, savers looking to tie their money up longer term can take advantage of significantly better rates than were offered three years ago.

The average two year bond currently offers a rate of 3.36%, up from 2.83% in March 2009, while the three year bond class now offers savers 3.42%, up from 2.98%.

Those prepared to lock their money in for even longer have seen the average rate on four year bonds rise from 2.89% to 3.80% and five year accounts from 2.86% to 3.95% - an increase of 1.09%.

"Many feel that the majority of savings accounts pay abysmal rates, with several accounts offering less than base rate," said Rachel Springall, spokesperson for Moneyfacts.co.uk.

"The only way for savers to keep out of the savings interest trap is to review their accounts at least annually.

"One-year fixed rate bonds and instant access accounts have been the meanest regarding interest payment with little or no improvement. One-year fixed deposits are paying less than what was offered three years ago.

"Fixed long-term bonds continue to offer the highest interest on the market as providers focus on offering the best deals to savers who are committed to locking their money away.

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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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