Saving products fall as Coronavirus hits the market | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 20/04/2020

Two base rate changes in March and the ongoing economic crisis caused by the Coronavirus pandemic has resulted in the largest withdrawal of savings products month-on-month since records began.

Data to be published in the Moneyfacts UK Savings Trends Treasury Report found that from the 1 March to the 1 April 2020, 180 savings products had been withdrawn from the market. Not only has the fall in the number of savings products available impacted savers’ choice, but has also seen a fall in savings rates as well. For example, the average easy access rate fell from 0.56% in March to 0.51% at the beginning of April and today stands at just 0.44%.

The 2020 ISA season

April brings with it the new tax year and, as a result, it is normally the height of the ISA season, when providers offer many of their most competitive ISA deals. This year, however, the combination of base rate reductions and the Coronavirus pandemic has resulted in ISA savers facing a disappointing April, with many providers pulling their ISA deals. In fact, between 1 March and 1 April 2020, 77 ISA deals were withdrawn from the market and the average easy access ISA rate fell from 0.83% to 0.79%.

Savings market analysis 

Product numbers and rates Mar-20 Apr-20
Number of live savings account options (including ISAs) 1,768 1,588
Number of live ISA options 417 340
Average easy access rate 0.56% 0.51%
Average easy access ISA rate 0.83% 0.79%

Average interest rates based on a £5,000 deposit as at the start of the month. Source: Moneyfacts Treasury Reports

Commenting on the fall in savings products, Rachel Springall, finance expert at Moneyfacts, said: “Savers will be disappointed to find that deals are being pulled left, right and centre, and this vanishing act is clearly due to the base rate cuts last month and uncertainties surrounding the Covid-19 pandemic. Providers are perhaps struggling to sustain their lucrative offerings or are pulling deals because they have crept up the top rate tables unexpectedly, resulting in a domino effect of cuts or withdrawals.

“We have not seen such sights since 2012, and this stark drop in savings products echoes when the Funding for Lending Scheme took its toll on the savings market – whereby providers no longer felt the need to rely on their savings deposits to fund their future lending. The Term Funding Scheme, which came into being in 2016, and the most recent Term Funding Scheme with additional incentives for SMEs scheme (TFSME) launched last week will no doubt continue the legacy of a less competitive savings market for the next four years, as providers are able to borrow cheaply from the Government.

“To add insult to injury for savers, ISA season was lack-lustre as the choice of deals fell by a fifth between the beginning of March and April, giving savers a very small window of opportunity to take advantage of new deals in the run-up to the new 2020/21 tax year. Interest rates have also fallen, with the average easy access ISA rate experiencing its biggest month-on-month drop since November 2019.

“These changes may well be just the beginning, as it can take up to three months for a base rate change to be passed onto savings accounts, and today yet another big bank brand decided to slash its easy access rates to a disappointing 0.01% (based on a £10,000 deposit) – NatWest. This joins Halifax, Lloyds Bank and Scottish Widows Bank, which also pay 0.01% today based on a £10,000 deposit after making cuts in March.

“In light of this savings market trauma, it has never been so vital for savers to take stock of their existing account to be sure they are still earning a reasonable return. Switching quickly is crucial if savers want to get the most lucrative rates and providers will need to act swiftly to cope with demand and keep a close eye on their peers positioning themselves in the top rate tables.”

Disclaimer

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.

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