Savings rates slump to lowest levels on record

Typical savings rates have slumped to record lows across the board, according to analysis of the market.

Interest rates have dipped to record lows across the savings spectrum, research by Moneyfacts.co.uk, whose electronic records go back to 2007, found.

The average easy access rate fell to 0.19% in December, which is less than a third of the rate of 0.60% paid a year ago, it said.

Fixed rates on savings deals have also tumbled, with the average one-year bond paying less than half that it did back in December 2019, at 0.54% compared with 1.23%.

The choice of products has also shrunk. There are now 1,514 savings deals including Isas on the market – 312 fewer than a year ago.

Rachel Springall, a finance expert at Moneyfacts, said: "Clearly it has been a tough year for savers, and they will be approaching the end of 2020 with rates falling to record lows.

"The coronavirus pandemic and subsequent Bank of England base rate cuts have left an unprecedented impact on the savings market and uncertainty remains.

"Savings providers have had to react to an extremely volatile market this year and this has meant deals have been cut multiple times in a short space of time in some cases or withdrawn from the market entirely. In recent weeks, the easy access market has changed considerably as savers continue to flood this arena thanks to the flexibility the accounts provide, and the recent rate cuts made by National Savings and Investments (NS&I)."

Ms Springall said data has shown that some savers have been able to build up cash reserves in accounts during the coronavirus pandemic.

She continued: "The sight of record low interest rates may cause apathy among savers, but it is vital they continue to compare deals on a frequent basis, especially if they have their cash within an easy access account or are about to come off a fixed-rate deal.

"There are many challenger banks that continue to take a consistent place within the top rate tables, so it really is worth considering these more unfamiliar brands if savers are hunting down the most attractive rates."

Here are average savings rates in December 2019, followed by December 2020, according to Moneyfacts.co.uk:

– Easy access accounts, 0.60%, 0.19%

– Easy access Isas, 0.87%, 0.27%

– Notice accounts, 1.05%, 0.47%

– Notice Isa accounts, 1.14%, 0.50%

– One-year fixed rate bond accounts, 1.23%, 0.54%

– Longer-term fixed rate bond accounts, 1.51%, 0.77%

– One-year fixed rate Isas, 1.17%, 0.52%

– Longer-term fixed rate Isas, 1.37%, 0.68%

Longer-term fixed bonds or Isas are those with terms over 550 days and average interest rates based on someone having a £5,000 deposit at the start of the month.