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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’.
It is not just variable rate savings account that have fallen in the past three months, but the average rates on fixed rate bonds as well. Again, a similar pattern could be seen in 2012 and 2008. Since March this year, the average one year fixed rate bond rate has fallen by 0.23%, from 1.15% on 11 March 2020 to 0.92% today. In the months after FLS was introduced, the average rate on a one year fixed rate bond fell by 0.3%, from 2.73% on 13 July 2012 to 2.43% on 15 October 2012. During the financial crash of 2008, the average rate on a one year fixed rate bond fell by 2.31%, from 6.17% on 15 September 2008 to 3.86% on 15 December 2008.
2020 Coronavirus impact | |||
11 March 2020 | 13 April 2020 | Today | |
Average one year fixed rate bond | 1.15% | 1.05% | 0.92% |
2012 Funding for lending launch | |||
13 July 2012 | 13 August 2012 | 15 October 2012 | |
Average one year fixed rate bond | 2.73% | 2.64% | 2.43% |
2008 Financial crash | |||
15 September 2008 | 15 October 2008 | 15 December 2008 | |
Average one year fixed rate bond | 6.17% | 6.04% | 3.86% |
Not only has the average rate on a one year fixed rate bond fallen significantly since March, but it is also heading for an historic low. “This means savers putting money away in the short-term will need to act quickly to take advantage of the most lucrative rates,” explained Springall.
With saving rates falling, and a number of average rates expecting to reach historic lows, savers should act quickly to secure the best deals, especially if they are looking to lock into a fixed rate account. “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,” Springall said.
Savers are also advised to regularly check the savings charts as providers have been launching new top rates, but having to reduce rates or withdraw products as they quickly reach their funding targets.
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. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfacts.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.
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The Moneyfacts Pick of the Week showcases the best of the latest products or rate changes to hit the consumer finance market.
Each week the moneyfacts.co.uk content team round up the very best savings rates available in the UK. Compare and apply today.
Each week the moneyfacts.co.uk content team round up the very best savings rates available in the UK. Compare and apply today.
Each week the moneyfacts.co.uk content team round up and discuss the very best ISA rates available in the UK. Compare and apply today.
Each week the moneyfacts.co.uk content team round up and discuss the very best ISA rates available in the UK. Compare and apply today.
The Moneyfacts Pick of the Week showcases the best of the latest products or rate changes to hit the consumer finance market. Brief product details, together with independent Moneyfacts analysis, can be used with confidence in your finance sections. You can select one or two products to sit beside a relevant story or use them all as a general feature provided they are sourced to our expert at Moneyfacts.
The Moneyfacts Pick of the Week showcases the best of the latest products or rate changes to hit the consumer finance market.
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