The best rates for savers are "collapsing" following the launch of a Government scheme to encourage banks to lend to households and firms, a consumer help website has warned.
The £80 billion funding for lending scheme (FLS) was launched to boost borrowing by giving lenders access to cheap finance - but analysts have suggested this has made them less reliant on the need to attract savers' deposits.
Research from Moneyfacts.co.uk showed how the number of savings accounts on the market and the best rates have nosedived since the scheme was launched at the start of August.
Sylvia Waycot, financial expert at Moneyfacts, said: "The immediate knock-on effect has been the collapse of savings rates across easy access, notice accounts and fixed bonds. And the devastation hasn't been limited to just the providers who have joined the FLS."
Ms Waycot said savings account providers that have previously developed a strategy to offer accounts that are consistently good but are not the best rates have suddenly found themselves topping "best buy" tables as others have lowered their savings rates.
She said: "This has caused those providers to also slash their rates to regain middle table rankings. And so it goes on and on. All this constant movement in rates has prompted some providers to withdraw their products from the market entirely."
Moneyfacts found that at the beginning of August when the FLS kicked off there were 63 one year fixed-rate cash Isas on the market, but this number has dropped to 50.
The highest rate on offer for this type of account is 3%, compared with 3.5% at the start of August. The average rate being offered to savers has also gone down, from 2.82% at the start of August to 2.42%.
The number of easy access accounts has also tumbled, from 470 when the scheme started to 441, while the best rate has dropped from 3.2% to 2.5% over the same period. The average rate for this type of account has also dropped, from 1.08% to 0.96%.
However, there have been signs that the FLS has had a positive impact for borrowers. The scheme has prompted the number of mortgages on the market to increase and caused lenders to slash their rates, although much of the strongest competition among lenders so far has been to attract mortgage borrowers with larger deposits.
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Best rates for savers 'collapsing'
Figures from charity Age UK show that 29% of those over 60 feel uncertain or negative about their current financial situation - with millions facing poverty and hardship.
Even though saving for retirement is not much fun, the message is therefore that having to rely on dwindling state benefits in retirement is even less so.
To avoid ending up in this situation, adviser Hargreaves Lansdown recommends saving a proportion of your salary equal to half your age at the time of starting a pension.
In other words, if you are 30 when you start a pension, you should put in 15% throughout your working life. If you start at 24, saving 12% of your salary a year should produce a similar return.