Average savings rates for Isas, easy access and fixed bonds have fallen to their lowest levels since records began in 2008 as dwindling interest rates and the coronavirus took their toll.
Data provider Moneyfacts found the average easy access Isa rate at the start of June had fallen to a low of 0.45 per cent, from 0.85 per cent in January.
One-year and longer-term Isa returns had dropped to below 1 per cent for the first time since December 2016, having fallen by 0.4 percentage points and 0.44 percentage points respectively since January, while the number of Isa products available fell by 74.
In fact, the average rate of notice savings accounts was the only rate not to have fallen to a record low in June after hitting 0.69 per cent, down from 0.89 per cent in May, according to Moneyfacts.
The number of savings products meanwhile, including Isas, at the beginning of June stood at 1,456, the lowest number since November 2016.
Moneyfacts said the drop in rates demonstrated that the savings market had “continued to deteriorate” after ongoing uncertainties surrounding the coronavirus as well as cuts to the base rate from 0.75 per cent to 0.25 per cent on March 11, and to 0.1 per cent on March 19.
According to Moneyfacts, 329 savings products had been withdrawn from the market since the start of the year.
Rachel Springall, finance expert at Moneyfacts, warned of further cuts if providers see an increase in cash deposits in the coming months.
She said: “Providers are facing an influx of deposits and need to quickly manage the flow of cash by adjusting the rates in their range or withdrawing their lucrative offers entirely.
“Easy access accounts continue to be a firm favourite among savers, but more so for their convenience than for the interest they can earn.
“Indeed, with the unsettled landscape the coronavirus pandemic has instilled, savers may wish to have an emergency fund built up that they can access quickly for peace of mind.”
In 2019 the Office for National Statistics measured the average share of household disposable income saved to stand at around 6 per cent, which has been predicted to rise to over 20 per cent amid lockdown by the Centre for Economics and Business Research.
Ms Springall said: “It seems imperative that savers act with pace to secure the most lucrative deals on the market.
“At the same time, a low interest rate environment should spur savers into switching, as they may well find their variable interest rate has plummeted in the aftermath of the two base rate cuts.”
She warned: “If savers are about to come off a fixed deal, they best brace themselves for disappointment when searching for a similar deal”.
Myron Jobson, personal finance campaigner at Interactive Investor, said: “The rate of interest offered on many savings products is simply unattractive, but the stock market is too risky for those with short term savings goals.
“The recent cut to the base rate to help remedy the economic impact of Covid-19 has been a bitter pill to swallow for savers, as banks and building societies were not as slow to pass on the reduction as they were to apply the modest 0.25 percentage point rise in base rates to 0.75 per cent back in August 2018”.