Savers have been fighting an “uphill battle” so far this year with rates plunging to new lows, and a finance expert has warned there will be even tougher times ahead.
Moneyfacts’ six-month review of the market revealed the average five-year fixed savings rate has fallen by 0.63 per cent since January this year.
For example, the average two-year fixed rate has dropped from 1.79 per cent in January to 1.39 per cent today.
Over this period, providers have made more than 900 individual cuts to savings rates, while just 111 rates have increased.
This comes as the Bank of England governor Mark Carney announced the base rate could plummet below the record low of 0.50 per cent in the near-future.
Charlotte Nelson, finance expert at research house Moneyfacts, said savers have been fighting an “uphill battle” to get a decent return in the first half of this year, and will need to brace themselves for tougher times ahead.
“If a good deal is to be secured, savers will have to shop around and work hard, and keep a close eye on the market.”
| Jan-16 | Apr-16 | Today |
Average Easy Access Account | 0.64% | 0.61% | 0.56% |
Average One-Year Fixed Rate Bond | 1.43% | 1.27% | 1.15% |
Average Two-Year Fixed Rate Bond | 1.79% | 1.55% | 1.39% |
Average Five-Year Fixed Rate Bond | 2.63% | 2.37% | 2.00% |
Source: Moneyfacts.co.uk | Compiled: 11.7.16 | ||
She said providers at the top of the best buy league tables are pounced on by savers who are desperate to secure a decent interest rate, meaning these deals rarely remain on the market for long.
“Therefore, providers who want to be at the top of the market only need to offer a reasonable return to move into prime position.”
Ms Nelson added it was hardly surprising that many have begun to wonder if the cuts will ever end.
Tony Catt, compliance officer and IFA at Anthony Catt Limited, said: “The rates are likely to go down at the end of the week if all the press rumours (about the monetary policy committee cutting the base rate) are accurate.
“If the banks continue to set their rates against the base rate, then they will pay no interest or even less than they do now.”
Mr Catt said banks should be made to link their deposit rates to their mortgage rate to give positive rates which would be “fairer” to consumers.
He said: “Mortgage rates are the lowest lending rate and therefore with all the other lending done at far higher rates, there is still plenty of profit for the banks.
“All an adviser can do with a deposit customer is offer condolences and show possible alternatives to get better rates, which is difficult if the clients are risk averse and made more difficult by the volatile markets at the moment.
“We live in interesting times.”
katherine.denham@ft.com
