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Derin Clark

Derin Clark

Online Reporter
Published: 19/10/2020

Since March, savings rates have been steadily falling, however average rates may have reached rock bottom in August and are slowly starting to recover.

Although experts have warned savers to remain cautious, the soon-to-be-published Moneyfacts UK Savings Trends Treasury Report has found that average saving rates across all charts have increased since August 2020.

While the increase in rates will be welcomed by savers, with many looking for quick access to their savings during these economically uncertain times, it will be disappointing to see that easy access saving accounts had the smallest average rate increase between August and October 2020 of just 0.01%, increasing from 0.22% to 0.23%. As the below chart shows, the biggest increase was seen in the longer-term fixed rate ISA chart, which saw average rates increase by 0.10%, from 0.75% in August to 0.85% in October.

As well as this, average savings rates remain significantly lower than a year ago. For example, the average easy access savings account rate in October 2019 was 0.64%, which is 0.41% higher than its average rate of 0.23% in October 2020.

Savings market analysis – average rates
  October 2019 August 2020 September 2020 October 2020
Average easy access rate 0.64% 0.22% 0.22% 0.23%
Average easy access ISA rate 0.91% 0.32% 0.32% 0.35%
Average notice rate 1.06% 0.48% 0.53% 0.53%
Average notice ISA rate 1.16% 0.52% 0.54% 0.54%
Average one-year fixed rate bond 1.29% 0.63% 0.65% 0.68%
Average longer-term fixed rate bond* 1.59% 0.84% 0.86% 0.93%
Average one-year fixed rate ISA 1.23% 0.56% 0.58% 0.62%
Average longer-term fixed rate ISA* 1.41% 0.75% 0.78% 0.85%

*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

Competition increase

Along with average rates rising, the last few months have also seen providers launching new savings products. Between August and October 2020, the number of live savings deals increased by 75, from 1,083 to 1,158, while there were 54 more ISA deals available by the start of October, increasing from 319 to 373. As well as this, the last few weeks have also seen new providers entering the charts, with JN Bank and DF Capital entering the charts for the first time.

Savers looking to benefit from newly launched deals are being urged to act quickly, as the shelf-life of savings products remains low. “Savings providers acted positively with rate rises and product launches during September, but some of the lucrative offers were short-lived – a trend seen across the sector,” explained Rachel Springall, finance expert at Moneyfacts. “The boosts have resulted in all average savings rates either rising or maintaining their levels seen one month prior, a refreshing change from the persistent falls that pushed rates to the record lows seen during August. However, as the market remains very fluid, its rejuvenation may well be a slow and steady process and savings providers must adjust to demand within the space of a week or even days in some cases. As shown with the average shelf life for a fixed rate bond, vigorous repricing has resulted in a fall to 28 days, the lowest number recorded since March 2009.

“Product choice has also increased by more than 100 deals since August, but overall there are still over 300 options less than a year ago so, with more room for improvement, it will be interesting to see whether growth continues and what types of offers providers focus on in the months to come. Consumers are pooling more cash into easy access accounts than fixed, with the latest Bank of England statistics showing that the inflow into interest-bearing sight deposits hit £2.4bn during August.”


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