Nearly a year on since the first coronavirus lockdown was announced, average savings rates have reached new lows, except for the notice account rate – which increased by 0.01 percent – according to new analysis. The Moneyfacts UK Savings Trends Treasury Report data, which is not yet published, found despite an uplift in product numbers for Individual Savings Accounts (ISAs), rates have worsened.
The savings market overall contracted month-on-month and product choice has dipped to a new low, the research has found.
According to Moneyfacts, there are now 1,385 savings deals, including ISAs, on the market.
This is 383 fewer deals available than a year ago.
And except for the average notice account rate, which has increased by 0.01 percent, all average savings rates fell month-on-month, reaching new lows since the money comparison website’s records began in 2007.
READ MORE: Saving amounts rise but pensioners and mortgage holders struggle
Rachel Springall, Finance Expert at Moneyfacts, commented on the analysis.
“Savings cuts continued to be the trend over the past month, with average easy access and fixed rates falling to new lows,” she said.
“March marks the anniversary of the first UK lockdown and the impact of the pandemic, which led to the two base rate cuts that set the market in motion to contract.
“As interest rates sit at an unprecedented level, it would not be too surprising to see apathy among savers when it comes to switching or perhaps look away from cash savings vehicles altogether and revaluate their attitude to risk.
“We may well be seeing an uplift in accidental savers, those consumers who have amassed disposable income from the lockdown and perhaps decide to save this within an easy access account for ease.
“Some savers may do so with their own bank, but typically the biggest high street banks pay rates as low as 0.01 percent, so it is clear to see why switching is a wise move.
“Should easy access accounts be flooded with cash, we could see providers cut rates further or even pull deals entirely to cope with demand.
“Over the past two years, the average easy access rate has fallen from 0.63 percent to 0.16 percent, a record low.”
With the tax year end nearing, Ms Springall also addressed the difference between ISAs and other savings accounts.
“There are only a few weeks left until the new tax year and even though there has been a small rise in the number of ISAs this month, rates have fallen,” she said.
“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).
“As it stands, the average one-year fixed rate ISA pays 0.38 percent compared to 0.43 percent on a one-year fixed bond.
“Longer-term fixed rates continue to drop too, but due to market uncertainties, savers may not want to tie their money down for long.”
The finance expert also issued a warning to savers searching for the best interest rates on the savings scene.
“As the savings market remains volatile, savers would be wise to consider challenger banks, which continue to take a firm place within the top rate tables, but also be mindful that a good deal doesn’t appear to last on sale for too long,” she suggested.
“Savers who have existing accounts and have not reviewed them in some time may wish to do so, as they could be on a much poorer rate of interest than they expect.”