The velocity of savings rate cuts on variable rate deals during the first six months of 2020 is officially the worst in over a decade for savers.
Due to these relentless rate cuts, savers are being urged to act and switch if they are getting a poor return on their hard-earned cash. Indeed, the latest analysis by Moneyfacts.co.uk reveals that variable rate savings accounts have dropped by the largest amount seen over the first six months of any year since 2009.
Those savers looking at fixed rates will also find they have fallen significantly over the past six months, and in fact average rates have fallen by the largest proportion over the first half of any year since 2009. In terms of the worst half-year, the largest falls were seen during the second half of 2012, in the aftermath of the Funding for Lending Scheme. Savers coming off a fixed rate imminently would be wise to check the latest deals, as rates could fall further still in the weeks to come.
Rachel Springall, Finance Expert at Moneyfacts.co.uk said, “Savers will be in for a shock to find the first six months of 2020 have been the worst for rate cuts in over a decade. Indeed, all average rates have fallen between January and June this year, but the falls are the largest we have seen since 2009, after the financial crash. This demonstrates how much the market has been impacted by the Coronavirus pandemic and base rate cuts, and it will leave savers feeling frustrated and disappointed.
“These rate cuts should be more than enough reason to give savers a push to switch their deal if they are getting a poor return on their hard-earned cash.
“Indeed, on an easy access account, savers could be earning as little as 0.01%, such as with NatWest, but the best rate on the market pays 1.15% from National Savings and Investments (NS&I) – on a £20,000 deposit, that is a difference in interest over 12 months of £228. If savers were looking to lock their cash away over the next 18 months, then the best deal comes from Bank of London and The Middle East (BLME), paying 1.15% as an expected profit rate, which is 0.44% more than the average rate today.
“If savers are looking for a decent return but do not wish to lock their money away for a year or more, then a notice account could be a good bridge between fixed and easy access accounts. One example of a deal with a short notice term is ICICI Bank UK’s 45-day notice account, which pays 1.24% gross monthly and is available through Raisin UK.
“Those savers who utilise their ISA allowance may feel despondent, as average returns have fallen between 0.48% (easy access ISAs) and 0.56% (longer-term fixed ISAs) since the start of 2020. The top easy access ISA today comes from Al Rayan Bank, which pays 1.00% as an expected profit rate, 0.63% more than the average easy access ISA rate.
“Despite this, savers may not find a fixed rate ISA a promising choice, as fixed rates have plummeted on one and five-year ISAs by 0.52% and 0.56% respectively since the start of 2020. If savers hunt down the top fixed ISA rate today, then they will find Shawbrook Bank at the top of the market, with its seven-year fixed ISA that pays 1.25% gross on its anniversary or 1.24% monthly.
“It is imperative that savers act quickly to acquire the top rates on the market regardless of which type of savings account they choose, as there seems no end to the downward trend. Due to the uncertainties that the Coronavirus pandemic has instilled, it is more important than ever before for consumers to build up an emergency fund that they can dip in to should they run into any financial difficulties in the months to come.”