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Mortgage cuts hit savers in the pocket

Mortgage cuts hit savers in the pocket

Category: Mortgages

Updated: 06/07/2010
First Published: 06/07/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Cuts made to the price of mortgage lending over the last nine months have had a significant effect on the average rate of interest offered to savers.

Research conducted by Moneyfacts Group has found that almost three in ten savers are looking to fix their rate of interest, with the average amount invested in a fixed term account standing at £36,872.

However, savers depositing that amount nine months ago would have received £1,209 in interest, compared to £978 today.

With providers turning their attention to attracting new business by reducing mortgage rates, savings rates have been hit.

Short term accounts have seen the biggest fall in interest, with one year fixed rate products falling to an all time average low of 2.62%, representing a decline of almost a quarter from nine months ago.

Two and three year fixed rates have also dropped markedly; having offered average interest of 3.75% nine months ago, two year accounts currently pay 3.16% on savings, while, over the same period, average interest paid on three year products has fallen from 4.16% to 3.52%.

Five year accounts have been the least affected, although, on average, savers can expect to receive 15.8% less interest on their savings on longer term deals.

Whereas a long term fixed rate would have paid an average rate of 4.77% nine months ago, it has fallen to 4.12%.

"Savers hoping for incentives from last month's Budget were left bitterly disappointed and many continue to feel their needs have been forgotten during the credit crisis," commented Michelle Slade, spokesperson for Moneyfacts Group.

"With a change in bank base rate still predicted to be a little way off, the situation for savers is likely to get worse before it gets better."

Savers can still beat the averages, however, and casting your eye over the Best Buy tables is a good place to start

Northern Rock and Barnsley BS both offer a rate of 3.00% on their one year bonds, while savers prepared to lock in for three years can get 4.10% from Lloyds TSB.

Easily beating the average long term account, ICICI Bank boasts a rate of 4.75% on its five year fixed rate bond.

Find the best mortgage rate - Compare best selling mortgages

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.