Savings rates fall for first time in more than two years as banks slash deals
Fixed savings rates have fallen across the board for the first time in more than two years, according to new monthly data, as the Bank of England makes progress in its battle against inflation.
Rates peaked in October as banks responded to calls from the government and City regulator to pass on higher interest rates to savers.
Latest figures from Moneyfacts on Tuesday showed that the average one-year fixed bond fell for the first time since April 2021 to 5.36 per cent, while the average longer-term fixed bond fell for a consecutive month to 5.02 per cent in November.
These numbers mark the biggest monthly drops since December 2020.
Fixed ISA rates also clocked their biggest monthly fall since July 2020, with the average one-year rate dropping for the first time since May 2021 to 5.2 per cent and the longer-term rate falling to 4.92 per cent.
Providers have slashed savings rates in recent weeks amid expectation that the Bank of England will keep holding interest rates before cutting them next year. Top savings rates fell below six per cent on 10 November.
Rachel Springall, a finance expert at Moneyfacts, said the cuts would come as “disappointing news to savers”.
“Customers of the biggest banking brands may hope to see rate improvements in the months to come, as banks will need to justify their current savings rates, following the Financial Conduct Authority’s (FCA) intervention,” she told City PM last week.
Springall added today: “There are expectations for interest rates to drop in the months ahead, so fixed savings rates could fall further before the year is over. However, there are still some providers enhancing their fixed rate savings deals, and challenger banks could go against the trend and increase their rates if they need to entice deposits to fund their future lending.”
With inflation falling to 4.6 per cent in October, many easy-access and fixed savings rates are offering positive real returns.
All variable rates have risen for 21 consecutive months in the longest streak since Moneyfacts’ records began in 2007, driven by base rate rises trickling through the market and fierce competition over the nation’s savings.