UK savings rates halve since coronavirus lockdown
Average savings rates in the UK have fallen for the fifth consecutive month, as the impact of coronavirus and subsequent base rate cuts hit returns.
Since lockdown restrictions were imposed in March, average savings rates for easy access, notice accounts and their ISA equivalents have halved.
Moneyfacts’ savings report shows all average saving rates are at their lowest point since its records began in 2007.
Easy access accounts, a firm favourite of savers, have halved from 0.56 per cent in March to 0.22 per cent this month, according to the data. One-year fixed bonds, longer-term fixed bonds and longer-term fixed ISAs reduce by at least a third.
The pandemic and base rate cuts have triggered a rate-cutting trend among savings providers, which Hargreaves Lansdown personal finance analyst Sarah Coles tells City PM has “inflicted serious damage”.
This may slow down but Moneyfacts finance expert Rachel Springall suggests “there are few signs of the market making a U-turn any time soon.” Choice has also narrowed, and while there has been a small increase in the number of savings account options, there are 366 fewer options than there were at the start of March.
Most of customers’ savings end up in easy access accounts with high street retail banks but there is a risk savers are earning just 0.01 per cent. Coles adds: “Even worse than that, much of the accidental savings we’ve made during lockdown are still stuck in current accounts: a third of this money is earning no interest at all.”
Challenger banks may look to entice new savers in the short-term but Springall says it is unclear whether this trend will continue over the coming months as the UK grapples with a recession.
“The average one-year fixed bond rate has fallen by more than a third since the start of March, so even if a few deals improve, there will need to be a market-wide movement to return to the rates seen pre-lockdown,” she says.
It is clear savers will need to act quickly, as Coles suggests savers keep three to six months of expenses “somewhere you can get at them in a hurry, so you need a competitive easy access account.”
Springall echoes this call, stating: “Savers who may wish to put away any disposable income amassed during lockdown will need to act quickly or be left disappointed.”