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Savers have a fight on their hands to make any return on their money as average interest rates fall to their lowest levels on record.
Rates have plummeted across all types of savings products since the Bank of England slashed the base rate from 0.75pc to 0.1pc in March. High-street lenders have been quick to pass on the cut to customers.
The average interest paid by an easy-access account has fallen by almost two-thirds, from 0.56pc to 0.22pc. Easy-access Isas average interest rates have fallen from 0.83pc to 0.32pc.
Even savers willing to lock their cash away for longer are short of options. The average interest paid by a one-year fixed-rate bond is now just 0.63pc, down from 1.15pc in March.
Rachel Springall of Moneyfacts, a data provider, said: “As Britain enters a recession for the first time in 11 years, consumers may be looking to put aside some cash for an emergency fund. But since lockdown savings rates have plummeted to record lows across the board, so prospective savers may be disheartened.”
She added that cuts to savings were expected to slow down but there were few signs of rates increasing any time soon. “Choice is also limited: there are 366 fewer options for savers than there were at the start of March.”
One provider offering a glimmer of hope is the Government-backed NS&I, which now offers many of the best deals on the market. Its income bonds offer an easy-access rate of 1.16pc – by far the best deal around.
The second and third highest-paying options for people wanting flexible access to their cash also come from the state-owned savings bank.
However, some people have reported problems of slow customer service and delays as new customers have flocked to open accounts with NS&I.
Any money savers choose to put aside must keep pace with inflation, or will lose value over time. Britain’s rate of inflation was well below the 2pc official target in June, at just 0.6pc. However, many savings accounts still fail to beat this.
Banks have also reacted quickly to fears over rising debt levels during the Covid-19 crisis, cutting back on their interest-free credit card deals and hiking eligibility requirements for mortgage customers. You can read more about what the recession means for your credit card and mortgage in our new series here.
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