Choice of savings accounts at three-year low amid ‘domino effect’ of rate cuts
The average one-year fixed bond rate has dipped below 1% for the first time in three years, according to a financial information website.
The average rate on one-year fixed bonds stands at 0.99%, the lowest level since May 2017 when it was 0.98%, Moneyfacts.co.uk said.
Meanwhile, the average one-year fixed Isa rate has fallen to 0.91%, the lowest since June 2017 when it was also 0.91%.
As of May, there were 1,548 savings account options on the market, including Isas. In March there were 1,768 deals available.
Moneyfacts said the current number of savings products is the lowest since February 2017, when there were 1,525 deals.
The average easy-access rate fell from 0.51% in April to 0.40% at the start of May. This was the biggest fall since December 2012.
Rachel Springall, a finance expert at Moneyfacts, said: “The number of savings accounts overall has now fallen to its lowest point in three years.
“Choice is dwindling for savers, in fact 220 deals have now vanished since the start of March, which was before the lockdown and two (Bank of England) base rate cuts.
“Those savers who are about to come to the end of their fixed bond may wish to prepare themselves for a shock, as they will find the top rates have dropped substantially over the years.
“Indeed, a year ago the top one-year fixed bond paid 2.20% as an expected profit rate from Bank of London and The Middle East (BLME), but today the top deal pays 1.50% from Gatehouse Bank as an expected profit rate.”
Ms Springall said that, based on an investment of £20,000, this difference would mean £140 less being earned in interest.
She said that savers who are looking for some flexibility with their cash may turn to an easy-access account.
But she added: “In fact, the market is already seeing a domino effect of rate cuts, with some of the top deals worsening in recent weeks.
“Providers are perhaps cutting rates to deter deposits due to demand or find they are much higher up the rate tables than they can cope with.”