Today, the full extent of how badly the savings market has been impacted during the first six months of this year became clear when new figures published reveal that the average savings rates for easy access, fixed bond and ISAs have fallen to their lowest levels since records began.
The figures released today, which are due to be published in the Moneyfacts UK Savings Trends Treasury Report, show that since January 2020, the number savings products available, including ISAs, has fallen by 329. In January 2020, there were 1,785 savings deals available, which had fallen to 1,456 available in June.
|Savings market analysis - product count|
|Product numbers and rates||Jan-20||May-20||Jun-20|
|Product numbers and rates
Number of live savings account options (excluding ISAs)
|Number of live ISA options||397||336||323|
Source: Moneyfacts Treasury Reports
Along with a fall in the number of savings deals available to customers, the saving markets has also seen average rates tumble since the start of the year. In fact, today, savers looking for the flexibility of an easy access account will find the average rate stands at just 0.30%, down from an average of 0.59% in January. Average rates on all types of savings accounts have seen significant falls since the start of the year, as two base rate cuts and the effect of the Coronavirus pandemic on the economy has impacted the savings market.
|Savings market analysis – average rates|
|Average easy access rate||0.59%||0.40%||0.30%|
|Average easy access ISA rate||0.85%||0.63%||0.45%|
|Average notice rate||1.03%||0.89%||0.69%|
|Average notice ISA rate||1.12%||0.89%||0.69%|
|Average one-year fixed rate bond||1.20%||0.99%||0.86%|
|Average longer-term fixed rate bond*||1.48%||1.18%||1.05%|
|Average one-year fixed rate ISA||1.15%||0.91%||0.75%|
|Average longer-term fixed rate ISA*||1.37%||1.07%||0.93%|
*Longer-term fixed bonds or ISAs are those with terms over 550 days. Average interest rates based on a £5,000 deposit as at the start of the month. Source: Moneyfacts Treasury Reports
Commenting on the figures released today, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “It is clear to see that the Coronavirus pandemic and subsequent base rate cuts have had a catastrophic impact on the savings market. Providers are facing an influx of deposits and need to quickly manage the flow of cash by adjusting the rates in their range or withdrawing their lucrative offers entirely.
“Savers may well have more disposable income as a result of the UK lockdown, and perhaps wish to safeguard this money by using a savings account. Easy access accounts continue to be a firm favourite among savers, but more so for their convenience than for the interest they can earn. Indeed, with the unsettled landscape the Coronavirus pandemic has instilled, savers may wish to have an emergency fund built up that they can access quickly for peace of mind.
“The choice of deals has continued to plummet as providers pull offers, perhaps that they can no longer sustain in the low interest rate environment as deposits surge. Indeed, the number of non-ISA savings deals is at its lowest level on our electronic records, as some providers pull out of sectors entirely. Choice is dwindling for savers, in fact, 329 deals across all savings products including ISAs have now vanished since the start of 2020.”
Savers who have been reluctant to open a new savings account in the hope that rates may start to improve could be disappointed, as Springall explained: “More cuts may be set to come as savings providers could see even more cash come their way in the months to come. According to the Centre for Economics and Business Research (Cebr), the amount of household disposable income that’s saved is expected to rise to over 20%, but a year ago the Office for National Statistics (ONS) measured the average share of household disposable income that was saved to be around just 6%. This then is catching providers almost off guard, and they can fill their subscription limits much more quickly in the process.
“Those savers looking to utilise their ISA allowance will be disappointed to find that all average ISA returns have dropped below 1% for the first time since December 2016. The drop has been more severe on fixed ISAs, with the average rate on one-year ISAs and longer-term ISAs falling by 0.40% and 0.44% respectively since the start of 2020. The choice of ISAs overall has also fallen, by 74 deals since the start of 2020. This then does not spell a positive outlook for the rest of the year.
“It seems imperative that savers act with pace to secure the most lucrative deals on the market. At the same time, a low interest rate environment should spur savers into switching, as they may well find their variable interest rate has plummeted in the aftermath of the two base rate cuts. If savers are about to come off a fixed deal, they best brace themselves for disappointment when searching for a similar deal.”
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.