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Rate warning for savers

Rate warning for savers

Category: Savings

Updated: 15/01/2010
First Published: 15/01/2010

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 It is now over 6 months old so the content may be out of date.

Savers have been warned that returns could remain low for the rest of the year, as banks and building societies instead focus their attentions on competing in the mortgage market.

According to research from Moneyfacts.co.uk, while the last few months have seen borrowers benefit from falling mortgage rates, savings rates have been gradually declining too.

Up to November last year, competition amongst banks for savers' money boosted the rates on offer, up to as much as ten times the base rate in some instances.

Since then, however, rates have dropped back to levels seen last summer.

Five year bond rates have fallen by 0.23 percentage points in that time, three year bonds by 0.22 and one year bonds by 0.17.

Over the same period, two year fixed rate mortgages have fallen by 0.24 percentage points and five year deals by 0.16.

"The focus appears to have switched back to lending and as the demand for savers' money reduces, so do the rates offered," said Michelle Slade, spokesperson at Moneyfacts.co.uk.

"Many savers have just experienced their worst ever year's returns and 2010 is not shaping up to be much better. The only benefit is likely to come from the forthcoming ISA season that will see providers battling it out to attract savers' tax free allowances."

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