Savers continue to face a challenging market as rates and deals fall

Savers looking to get a competitive savings deal will be disappointed with new figures showing that over the last month average savings rates across all savings charts, except notice accounts, have fallen.

The figures, due to be released in the Moneyfacts UK Savings Trends Treasury Report, found that not only have nearly all average saving rates fallen month-on-month, but the overall number of deals available has also fallen to a new low with just 1,385 savings accounts and ISA deals now available in the charts.

For savers hoping that March would see the start of a competitive ISA season, the figures are especially disappointing as the biggest month-on-month average rate fall came in the notice ISA chart, where the average rate fell by 0.06%, down from 0.40% on 1 February 2021 to 0.34% on 1 March 2021. During the same period, the average one year ISA rate fell by 0.04%, down from 0.42% to 0.38%, and the average longer-term fixed rate ISA* fell by 0.02%, from 0.61% to 0.59%.

“There are only a few weeks left until the new tax year and even though there has been a small rise in the number of ISAs this month, rates have fallen,” explained Rachel Springall, finance expert at Moneyfacts.co.uk. “The differential rate between fixed ISAs and non-ISAs remains, reiterating the necessity for savers to carefully consider their tax-free allowance and Personal Savings Allowance (PSA).”

The only chart to see average rates rise this month was notice accounts, which increased by 0.01% month-on-month from 0.36% to 0.37%. Meanwhile, one year fixed rate bonds and longer term bonds*, as with fixed ISAs, saw the average rates fall the most. Both the average one year fixed bond and longer term fixed bond rates fell by 0.03% between 1 February 2021 and 1 March 2021, falling from 0.46% to 0.43% and 0.68% and 0.65% respectively.

Savers looking to get the most competitive rates should visit our ISA and saving account charts as they will find many deals offering above-average rates. Often, the best deals are being offered by unfamiliar challenger banks, but savers should not dismiss these banks due to not having brand recognition, as all the providers in our charts are under the Depositor Protection Scheme, meaning that deposits of up to £85,000 under one banking licence are protected. More information about the Depositor Protection Scheme can be found here.

“As the savings market remains volatile, savers would be wise to consider challenger banks, which continue to take a firm place within the top rate tables, but also be mindful that a good deal doesn’t appear to last on sale for too long,” added Springall. “Savers who have existing accounts and have not reviewed them in some time may wish to do so, as they could be on a much poorer rate of interest than they expect.”

Another option long-term savers could consider is a stocks and shares ISA . These ISAs have the benefit of offering the same tax-free allowance of £20,000 for the tax year as cash ISAs, but savers should be aware that these are a much riskier option that could result in savers not making any returns on their investments and, in some cases, they may lose their initial capital as well.

Alternatively, those prepared to opt for a risker saving option could consider other types of investments, such as structured deposits, real estate investment trust (REIT) or shares . More information about these types of investments can be found here.

*Longer term fixed bonds or ISAs are those with terms over 550 days.