Average savings rates squashed to new record lows in January 2021

Average savings rates have started 2021 by falling to new record lows, according to analysis.

Moneyfacts.co.uk found the situation has gone from bad to even worse in recent weeks – and it warned that further cuts may still be made.

Savings rates had previously slumped to record lows in December 2020, but in January 2021 they edged further down still to hit a new low point.

All average savings rates on the market across the different types Moneyfacts analysed fell month-on-month in January 2021, reaching new lows since its electronic records started in 2007.

The average easy access savings rate is now just 0.18%, edging down from 0.19% in December 2020 and less a third of the 0.59% average easy access savings rate recorded a year ago, back in January 2020.

The typical easy access Isa now pays a meagre 0.25% – down from 0.27% in December 2020 and 0.85% in January 2020.

The choice of savings products has also been squeezed, with 1,437 savings deals found by Moneyfacts in the current market – 348 fewer than a year ago.

Rachel Springall, a finance expert at Moneyfacts, said: “It is hoped that the onslaught of rate cuts and withdrawals across the savings market will slow compared to 2020, but there is still room for providers to make further cuts and adjust their savings ranges as a whole depending on the levels of demand they may face this year.

“If savers want to be in with a chance of getting the best possible return on their cash, then they would do well to keep a close eye on the market and sign up to rate alerts, as the market remains unpredictable.”

Here is how average savings rates have diminished, according to Moneyfacts.co.uk, with the average for January 2020 followed by the averages for March 2020, December 2020 and January 2021 (Longer-term fixed bonds or Isas are those with terms over 550 days. Average interest rates based on a £5,000 deposit as at the start of the month.):

– Average easy access rate, 0.59%, 0.56%, 0.19%, 0.18%

– Average easy access Isa rate, 0.85%, 0.83%, 0.27%, 0.25%

– Average notice account rate, 1.03%, 1.00%, 0.47%, 0.40%

– Average notice Isa rate, 1.12%, 1.13%, 0.50%, 0.44%

– Average one-year fixed rate bond rate, 1.20%, 1.15%, 0.54%,0.49%

– Average longer-term fixed rate bond rate, 1.48%, 1.37%, 0.77%, 0.70%

– Average one-year fixed rate Isa, 1.15%, 1.14%, 0.52%, 0.47%

– Average longer-term fixed rate Isa, 1.37%, 1.29%, 0.68%, 0.62%