Derin Clark

Derin Clark

Online Reporter
Published: 19/08/2019

Last month saw 40% of savings providers cut or withdraw their fixed rate bonds, data from Moneyfacts UK Savings Trends Treasury Report has found.

The findings from the report, which is not yet published, will be unpleasant reading for savers, especially for long-term savers who have been hit particularly hard, with long-term rates seeing the biggest month-on-month drop since November 2016. In fact, during July, a third (33%) of providers adjusted their longer-term fixed bond range, but short-term savers were also hit, with a fifth (20%) of providers amending their one-year offerings.

Savings market analysis 

  April 2018 August 2018 July 2019 August 2019
Average one-year fixed rate bond 1.22% 1.32% 1.41% 1.37%
Average longer-term fixed rate bond* 1.69% 1.82% 1.78% 1.72%

*Longer-term fixed bonds are those with terms over 550 days. Source: Moneyfacts Treasury Reports

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The cuts to fixed rate bonds are gaining momentum, so much so that returns are dropping to their lowest levels seen in at least twelve months. This will be disappointing news to the day-to-day saver, as providers are reacting swiftly to a shift in their market position.

“As our analysis shows, almost half of providers in the savings market withdrew or cut their fixed rate bonds throughout July, a large portion of which were from challenger banks and Islamic banks. The challenger brands still dominate the fixed rate bond market regardless, however if savers lock in today versus a month ago, they may well have missed the boat for a more generous return.

“Providers appear to be altering their market position not necessarily to deter savers, but to adjust their margins and close the gap between their competition during a period of economic uncertainty. Indeed, the re-pricing comes at a time when the savings market may be preparing for a drop in the Bank of England base rate, with the two-year SWAP rate - a key indicator - falling to its lowest point (0.67%) since September 2017 (0.54%).

“Savers would be wise to prepare themselves for possible further falls in fixed rates as market influences take their toll, so if they are looking to lock away their cash, speed is of the essence. The same speed is crucial for savings providers to have an opportunity to adjust their rates and retain a decent market position to help gain deposits to fund their future lending - rather than pulling a deal entirely due to demand.”

Data published this week in the Moneyfacts UK Mortgage Trends Treasury Report found that competition within the tracker rate mortgage sector is falling, as there are now only 242 tracker rate mortgages available in the market, which is less than 5% of all residential mortgages. As well as this, the report also revealed that consumers are overwhelmingly choosing fixed rate mortgages, with nearly 92% of all new advances approved during the first three months of 2019 for this type of mortgage.

This week it was revealed that the rate of inflation had risen to 2.1% in July, which meant that savers wanting to put their money into an account that matched or beat inflation had to choose a fixed rate account. Moneyfacts.co.uk research found that just 65 fixed rate bonds and two fixed rate ISAs (based on a £10,000 deposit) could match or beat inflation and, of these, only 57 fixed rate bonds and one fixed ISA paid more than 2.1%.

Nationwide Building Society has extended its later life mortgage products and advice to include both existing and new customers wanting to borrow later in life.

The building society now offers three Nationwide Later Life mortgage products to borrowers aged 55 and over, as well as access to its Later Life mortgage consultants. The products available are a Retirement Capital and Interest product (RCI), a Retirement Interest Only (RIO) product and a Nationwide Lifetime Mortgage.  

Students receiving their A-level results and confirming their university places today should also start thinking about getting their finances organised ready for the new university year.

University can be an expensive time for students, who not only have to pay tuition fees but also find the money for day-to-day living costs. A recent survey by Save the Students found that 79% of students worry about money while at university, with 57% saying this worry impacted their mental health, which highlights the need for students to have a good grasp of their finances before they begin their degree.

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