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June Premium Bond winners announced
nigel woollsey

Nigel Woollsey

Online Writer
Published: 01/06/2020

As lockdown restrictions start to ease across the UK, this month’s Premium Bond winners have even more reason to celebrate. This month the two £1 million Premium Bond winners are from Nottingham and Stoke-on-Trent, with countless others across the country landing additional prizes of between £100,000 to £25.

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Gloomy outlook for savers as more cuts expected

Savers hoping that the savings market will bounce back quickly from the Coronavirus pandemic will be disappointed by research that has found the market is facing similar a significant impact to that seen in the aftermath of the 2008 economic crisis and the 2012 funding for lending (FLS) launch.

At times of financial crisis savers tend to opt for easy access accounts as they enable quick access to funds. Our research has found that in the three months since the Coronavirus pandemic began impacting the UK economy, the average rate on an easy access account has halved, from 0.60% available on 11 March 2020 to 0.30% today. This compares to the 2008 financial crash, when average easy access account rates fell by 1.72%, from 3.90% on 15 September 2008 to 2.18% on 15 December 2008. During a three month period in 2012 the average rate on an easy access savings account fell by 0.04%, from 1.14% on 13 July 2012 to 1.10% on 15 October 2012.

 

2020 Coronavirus impact    
  11 March 2020 13 April 2020 Today
Average easy access rate 0.60% 0.50% 0.30%
2012 Funding for lending launch
  13 July 2012 13 August 2012 15 October 2012
Average easy access rate 1.14% 1.14% 1.10%
2008 Financial crash
  15 September 2008 15 October 2008 15 December 2008
Average easy access rate 3.90% 3.94% 2.18%

 

“The financial crash in 2008 and the launch of FLS in 2012 had catastrophic effects on the savings market and the latest shake-up caused by the Coronavirus pandemic should not be taken lightly,” said Rachel Springall, finance expert at Moneyfacts.co.uk.

“Savings providers have less reason to improve their range of deals to entice savers right now as they have support available from the Government to fund their future lending.

“Until savings providers desire savers’ cash once more, we are unlikely to see an influx of deals climbing the top rate tables – in fact, we are more likely to see a race to the bottom to cope with demand or see deals with a very short shelf life.”

Clearly savers have faced challenging markets in the past, however this year savers have the added challenge of average easy access rates starting at a lower rate than in previous years. In addition to this, in March the Bank of England cut base rate to its lowest level in history of 0.1% and the Bank has negative interest rates under ‘active review’.

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The best ISA rates this week 29.5.20

Sadly, despite last week’s fall in the inflation rate to 0.8%, the ISA market continues to be somewhat fluid, with both rates and product availability still heading in a downward direction. However, there are bright spots for those who are still looking for the best, inflation-beating rate when it comes to a range of ISAs. Happily, the top products in the fixed rate, easy access and notice ISA categories are still offering rates that beat the current level of inflation – although it must be stressed that these could be withdrawn with little notice so consumers would be wise to act quickly to secure these deals.
As ever, savers should be aware that although we have included ISAs that can be opened and managed in branch, consumers are advised to check with the bank or building society to ensure this service is still available, as many are only providing essential banking services in branch at the moment due to the Government’s restrictions on movement.

 

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The best savings rates this week 29.05.20

There’s been quite a bit of change in the savings charts since our last round up a week ago. Several products and providers that were featuring prominently have dropped out of the tables and overall interest rates are noticeably lower than those of last week too.

Although inflation currently remains at 0.8% savers may not be able to rely on finding inflation-beating rates available in the charts forever. While rates as high as 1.90% AER continue to be available in the fixed rate bond charts, savers looking to secure the best rates are urged to act quickly as it is likely that savings rates will continue to fall over the next few months.

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Savers opt for one year fixed rate accounts over longer term deals

Savers are sacrificing better rates available by locking into long-term accounts and are instead opting for short-term accounts.

In research published in an independent white paper covering the savings market, traffic data from Moneyfacts.co.uk found that consumers were favouring one year fixed rate bonds over those with longer fixed terms. In fact, the research revealed that one year fixed bond traffic achieve a 44% share of total website visits* for fixed rate bonds, while five year fixed bonds was just 10%.

Along with the increase in popularity of short-term bonds, our research also found that the difference in the average rate being offered on one year fixed rate bonds and five year fixed rate bonds has narrowed in the past year. As the below table shows, during January 2016 the difference in average rates between one and five year fixed rate bonds was 1.17%, while during May this year it was just 0.39%. A similar picture can be seen within the ISA market, with the difference in average rates between one and five year ISAs standing at ISAs standing at 0.94% in January 2016, while during May this year it was down to 0.42%.

 

Savings market analysis - average rates 

  01-Jan-16 28-Apr-20 22-May-20
Average one-year fixed rate bond 1.47% 1.03% 0.94%
Average five-term fixed rate bond 2.64% 1.39% 1.33%
Difference between one- and five-year bonds above 1.17% 0.36% 0.39%
Average one-year fixed rate ISA 1.40% 0.94% 0.80%
Average five-term fixed rate ISA 2.34% 1.27% 1.22%
Difference between one- and five-year ISA above 0.94% 0.33% 0.42%

 

Commenting on the research, Rachel Springall, finance expert at Moneyfacts.co.uk, said: Savers appear to be eyeing up shorter-term bonds to acquire a competitive rate of interest, guaranteed to be paid for the next twelve months, and less so eyeing up longer-term fixed deals. As it stands savers may not want to lock their money away beyond a year and in fact, interest rates on five-year fixed bonds may not be enough for them to consider.

“The difference in rate offered on one-year and five-year bonds has fallen by two thirds between January 2016 and today which is a huge change, indeed the differential rate was 1.17% but it is now 0.39%. This means there is less incentive for savers to choose a five-year bond over a one-year option.

“A similar pattern can be seen on ISAs, so those savers who turn to these tax-free vehicles year on year will see less reason to lock their cash away for five years. Indeed, the differential rate has halved compared to four years ago in January, down from 0.94% to 0.42% today.

“In light of these developments, savers may well be rushing to secure a competitive rate over the next twelve months before rates worsen, and as it stands there may be less demand for long-term bonds as the months progress.”

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Recent News

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Biggest banks offer below average easy access rates

26th May 2020

Savers with an easy access account from a high street bank could find they are getting poor returns on their savings, as nine of the 15 biggest savings providers pay lower rates than the market average

Savers with an easy access account from a high street bank could find they are getting poor returns on their savings, as nine of the 15 biggest savings providers pay lower rates than the market average

Read More
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The best savings rates this week 22.05.20

22nd May 2020

On Wednesday it was announced that inflation (the Consumer Price Index) fell to 0.8%. This meant that despite saving rates falling since March, savers could still easily find inflation-beating rates available in the charts

On Wednesday it was announced that inflation (the Consumer Price Index) fell to 0.8%. This meant that despite saving rates falling since March, savers could still easily find inflation-beating rates available in the charts

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The best ISA rates this week 21.5.20

21st May 2020

There was some good news for ISA savers this week as it was reported yesterday that inflation has fallen to 0.8%, which means that all the top rates available in the ISA charts are now able to beat inflation

There was some good news for ISA savers this week as it was reported yesterday that inflation has fallen to 0.8%, which means that all the top rates available in the ISA charts are now able to beat inflation

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Rate set to be cut on Virgin Money easy access ISA

21st May 2020

Virgin Money is set to cut the rate on its closed easy access E-ISA Issue 14 from 1.31% to 1.01% on 2 June

Virgin Money is set to cut the rate on its closed easy access E-ISA Issue 14 from 1.31% to 1.01% on 2 June

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Most Popular Savings News

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The best ISA rates this week 29.5.20

29th May 2020

The best ISA rates this week across fixed, easy access and notice accounts.

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Savers opt for one year fixed rate accounts over longer term deals

27th May 2020

Savers are forgoing getting better rates by locking into long-term accounts and are instead opting for short-term accounts

Savers are forgoing getting better rates by locking into long-term accounts and are instead opting for short-term accounts

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The best savings rates this week 29.05.20

29th May 2020

There’s been quite a bit of change in the savings charts since our last round up a week ago. Several products and providers which were featuring prominently have dropped out of the tables and overall interest rates are noticeably lower than those of last week too.

There’s been quite a bit of change in the savings charts since our last round up a week ago. Several products and providers which were featuring prominently have dropped out of the tables and overall interest rates are noticeably lower than those of last week too.

Read More
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Biggest banks offer below average easy access rates

26th May 2020

Savers with an easy access account from a high street bank could find they are getting poor returns on their savings, as nine of the 15 biggest savings providers pay lower rates than the market average

Savers with an easy access account from a high street bank could find they are getting poor returns on their savings, as nine of the 15 biggest savings providers pay lower rates than the market average

Read More

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