Savers face a disappointing start to 2020 as rates fall | moneyfacts.co.uk
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Derin Clark

Derin Clark

Online Reporter
Published: 17/02/2020

Savers hoping that savings rates will improve this year will be disappointed to find that average long-term fixed rates are at their lowest point since May 2017.

Date from the latest Moneyfacts UK Savings Trends Treasury Report, soon to be published, reveals that fixed rates have continued falling, resulting in the average longer-term fixed rate currently standing at 1.43%, its lowest point since May 2017 when it stood at 1.40%. In addition to this, the average one year fixed rate is currently 1.17%, its lowest level since January 2018 when it stood at 1.16%.

Fall in ISA rates

There is more bad news for savers who were hoping for a competitive ISA season this year, as the average longer-term fixed ISA rate is currently at 1.34%, its lowest point since October 2017 when it stood at 1.32%. Furthermore, the average one year fixed ISA rate is currently at 1.12%, its lowest level since March 2018 when it was 1.12%. Rachel Springall, finance expert at Moneyfacts.co.uk, said: “As less than two months remain until the new tax year, the drop in both the average longer-term and one-year fixed ISA rates could forewarn an uncertain ISA season for 2020, bad news for savers who may be hoping for better deals by April.”

The savings market

Commenting on the overall fall in savings rates Springall said: “Savers will be disappointed to find that all average fixed rates fell this month, so if they have been waiting for the market to improve since the end of 2019 – they will in fact find lower returns.”

Savings market analysis 

  Feb 2019 Dec 2019 Jan 2020 Feb 2020
Average one year fixed rate bond 1.46% 1.23% 1.20% 1.17%
Average longer-term fixed rate bond* 1.85% 1.51% 1.48% 1.43%
Average one year fixed rate ISA 1.37% 1.17% 1.15% 1.12%
Average longer-term fixed rate ISA* 1.60% 1.37% 1.37% 1.34%

*Longer-term fixed bonds or ISAs are those with terms over 550 days. Source: Moneyfacts Treasury Reports 

Springall highlighted data from the Bank of England that found £1.1bn flowed out of interest-bearing time deposits in December, which includes fixed rate accounts, the highest monthly outflow since July 2018. She added: “It appears that savers refrained from locking their cash away during December 2019, perhaps in favour of moving their cash where it could be accessed more immediately. Indeed, the £1.1bn flow out of interest-bearing time deposits – such as with fixed rate bonds – was the highest monthly outflow since July 2018, according to Bank of England data. This could well be attributed to market uncertainty, as £31.5bn flowed into sight deposits (such as easy access accounts) during 2019 – £3.4bn during December 2019 alone.

“According to the statistics for December 2019 from UK Finance, deposits held in immediate access accounts with high street banks increased by 3.5% year-on-year. While this may seem like a convenient and safe choice during times of economic uncertainty, savers may not be getting the best return on their cash. Our data shows that the average easy access rate on offer from a high street bank stands at just 0.43%.

“Savings providers still appear to be feeling pressure to adjust their market position regularly, as rates have continued to plummet across the fixed rate market – causing a domino effect. The average shelf-life of a fixed rate bond has dropped to 68 days – the biggest month-on-month fall (from 95 days a month ago) seen since July 2019 and is the lowest number of days seen since October last year.”

Saving rates have fallen despite highly competitive rates being launched by challenger banks over the past two years, as Springall revealed: “It’s clear to see that any positive impact that was driven by challenger bank competition and two base rate rises over the past two years has unravelled and it is uncertain how much time will need to pass for the market to rejuvenate.”

Savings rates

A full list of all current savings rates can be found on our savings charts and ISA charts.

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