Savings: Large banks lower rates to 0.01% – expert advises on worrying ‘domino effect’
Coronavirus has, on top of the health worries, created a substantial level of stress for personal finances. People across the UK will need to focus their attention on their savings as income and employment becomes precarious.
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Research from Moneyfacts, the money comparison company, has found that savings accounts across the country are not clearly feeling the effects of the base rate cut and coronavirus.
There has been a massive drop in the actual amount of savings accounts available, falling from 1,768 in March to 1,588 in April.
On top of this, existing easy access savings rates have also dropped from 0.56 percent in March to 0.51 percent at the beginning of April.
Those rates continued to fall and currently, they stand at around 0.44 percent.
ISA accounts are also seeing negative repercussions.
April is usually considered the start of the ISA “season” as the new tax year starts and new accounts can be opened.
However, savers looking to open ISA accounts would have had limited options recently.
Moneyfacts found that at the start of March there were 90 ISA providers offering 417 accounts but by the end of the month, there were 86 providers offering just 340 products, a drop of almost a fifth.
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Rachel Springall, a Finance Expert at Moneyfacts, commented on the sorry state of affairs: “Savers will be disappointed to find that deals are being pulled left, right and centre, and this vanishing act is clearly due to the base rate cuts last month and uncertainties surrounding the Covid-19 pandemic. “Providers are perhaps struggling to sustain their lucrative offerings or are pulling deals because they have crept up the top rate tables unexpectedly, resulting in a domino effect of cuts or withdrawals.”
“We have not seen such sights since 2012, and this stark drop in savings products echoes when the Funding for Lending Scheme took its toll on the savings market – whereby providers no longer felt the need to rely on their savings deposits to fund their future lending.
“The Term Funding Scheme, which came into being in 2016, and the most recent Term Funding Scheme with additional incentives for SMEs scheme (TFSME) launched last week will no doubt continue the legacy of a less competitive savings market for the next four years, as providers are able to borrow cheaply from the Government.”
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Unfortunately, these low rates are something consumers will likely need to get used to for the foreseeable future.
As Rachel continued: “These changes may well be just the beginning, as it can take up to three months for a base rate change to be passed onto savings accounts, and today (April 20) yet another big bank brand decided to slash its easy access rates to a disappointing 0.01 percent (based on a £10,000 deposit) – NatWest.
“This joins Halifax, Lloyds Bank and Scottish Widows Bank, which also pay 0.01 percent today based on a £10,000 deposit after making cuts in March.”
There is little that savers can do to change this but Rachel does offer some advice for worried customers.
While it may be difficult to make it a priority at the moment, focusing on switching accounts could pay dividends, as she explained: “In light of this savings market trauma, it has never been so vital for savers to take stock of their existing account to be sure they are still earning a reasonable return.
“Switching quickly is crucial if savers want to get the most lucrative rates and providers will need to act swiftly to cope with demand and keep a close eye on their peers positioning themselves in the top rate tables.”
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