Savings account: Savers ‘wise to act with speed’ as savings rates hit record low

Martin Lewis reveals top normal savings accounts

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Interest rates and choice when it comes to savings accounts have plunged, new analysis by money comparison website Moneyfacts has found. The savings market overall contracted month-on-month and product volumes have now reached their lowest recorded levels, with all average savings rates reaching new lows, according to the Moneyfacts UK Savings Trends Treasury Report.

Analysis has found ISA – which stands for an Individual Savings Account – rates have failed to rise between December and February (in the run-up to the ISA season) for the past two years, and rates have now reached new lows.

There are now 1,387 savings deals (including ISAs) on the market, which is 398 fewer deals available than a year ago, Moneyfacts said today.

Findings show average savings rates fell month-on-month, reaching new lows since the website’s electronic records began in 2007.

This month, the average easy access rate is 0.17 percent, down from 0.18 percent in January 2021, Moneyfacts found.

The average one-year fixed rate bond has dropped from 0.49 percent last month to 0.46 percent in February.

So, what does this mean for savers?

Rachel Springall, Finance Expert at Moneyfacts, commented on the analysis.

“Savers’ expectations of an ISA season will continue to wane in 2021 as rates plunge and some providers pull their deals entirely,” she said.

“There does not appear to be any promising signs of competition, as rates reached new lows this month. Between December and February, average ISA rates failed to improve, the same pattern seen a year ago.

“Our analysis of variable and fixed average ISA rates shows no improvement between that very same period since December 2018 to February 2019, two years ago.

“Savings rates outside of ISA wrapper continued to deteriorate, reaching new lows this month.

“The average one-year and longer-term fixed bond rates now pay less than half that seen a year prior.

“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).

“Easy access accounts remain a convenient, safe and popular savings vehicle for consumers and according to the Bank of England, cash continues to flood into sight deposits, hitting £101.87billion during 2020.

“Despite deposits reaching £14.67billion during December, interest rates on easy access accounts fell to a record low of 0.17 percent and there is now little difference between the top 10 best rates on the market.

“The most notable change month-on-month across the market has been its contraction, as there are now fewer savings deals on offer than ever before.

“In fact, there are 398 fewer overall than a year ago and looking solely at ISAs, there are 82 fewer deals.

“The fall however should not deter savers from comparing deals as they could still get a better rate by switching, especially if they have their money stored away in a convenient easy access account with their high street bank.”

Ms Springall also commented on the market-leading interest rates when it comes to savings at the moment – including explaining why savers may want to take action sooner rather than later.

“Challenger banks and building societies continue to offer some of the best returns but savers would be wise to act with speed to take advantage of the top deals,” she said.

“Due to the relentless pace of cuts and withdrawals in the aftermath of the Bank of England base rate cut and influence of the coronavirus pandemic, a good deal doesn’t tend to have a very long shelf life.”

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