A record number of savings accounts have disappeared over the last month as coronavirus shocked the savings market, new figures show.
There were 180 savings accounts and tax-free Isas of all term lengths pulled from sale following a pair of Bank of England base rate cuts in March, according to research from financial information website Moneyfacts.
While Britain’s biggest banks weigh down average rates with rock bottom interest payouts, Nationwide Building Society is set to hand savers more misery in the form of 61 cuts bigger than the base rate, while other big banks will cut rates to as low as 0.01 per cent.
Punctured: Moneyfacts said there were 180 fewer savings accounts available than this time a month ago, the biggest disappearance on record
The average easy-access account has fallen 0.12 percentage points over the last month to just 0.44 per cent, with over a hundred accounts from big banks set to pay savers just £1 on every £10,000 of savings, £119 less than the best deal on the market.
On 11 March, when the Bank of England cut its base rate by 0.5 percentage points, the best easy-access rate paid 1.32 per cent. After a further 0.15 percentage point cut eight days later, the best rate available is now 1.2 per cent.
In mid-March, Moneyfacts found there were 1,768 accounts of all terms open to savers.
There are now just 1,588. While fixed-term deposits, especially ones of one-year, have previously held up relatively well, there are signs they are beginning to buckle, and best buy deals are disappearing quickly.
Moneyfacts’ Rachel Springall said: ‘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 coronavirus 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.’
This domino effect is exacerbated by the fact most of the banks at the top of our easy-access tables are smaller providers, meaning they cannot sustain the inflows of money from rate-starved savers for too long.
|March 2020||April 2020|
|Number of available savings accounts||1,768||1,588|
|Number of available tax-free Isas||417||340|
|Average easy-access rate||0.56%||0.44%|
|Average easy-access Isa rate||0.83%||0.79%|
One of the sole exceptions is Goldman Sachs-backed Marcus Bank, which has signed up 500,000 customers and taken in £17billion since it launched in September 2018.
But last Friday it cut its rate from 1.3 per cent to 1.2 per cent, which was swiftly followed by Aldermore Bank pulling its 1.25 per cent paying offer.
Ford Money pulled a swift U-turn, having previously been planning to introduce an account paying 1.25 per cent – which was then canned after the Marcus announcement.
James Blower, industry expert and founder of website The Savings Guru, said the volatility in the savings market is going to continue, and that best buy easy-access rates were heading towards 1 per cent.
Savers who spot an attractive rate should secure it while they can, as deals will disappear fast.
The fall in the average easy-access rate is likely because banks including Halifax, Lloyds, NatWest and Royal Bank of Scotland have already chopped some of their easy-access rates to as low as 0.01 per cent; £1 interest on every £10,000 in savings.
|Bank||New easy-access interest rate||Interest earned on £50,000||Interest earned on £85,000|
|Marcus (best buy rate)||1.2%||£600||£1,020|
|Source: Savings Champion|
Big banks pay too little to pass on the base rate cut
However, while big banks have already used the opportunity of a 0.65 percentage point cut in the Bank of England base rate to hand savers bad news, few have been able to pass on that full cut as the rates they offer are already pitiful.
Data handed to This is Money by analyst Savings Champion found that of 345 cuts to savings accounts lined up by the UK’s biggest banks between now and July, just 63 of those, 18 per cent, will be by 0.65 percentage points or more.
Of those 63, 61 will be made by Nationwide on accounts paying between 0.7 per cent and 3.5 per cent.
Nationwide will make 261 cuts to savings accounts of between 0.09% and 2.5% over the next month
Britain’s biggest building society is making 261 cuts in total, but more than three-quarters of the accounts already paid lower than the previous base rate of 0.75 per cent.
Those savers who were lucky enough to hold money in accounts paying more than the base rate will find the rates on their savings shrink drastically.
However, unlike customers of some of the other big banks, they were at least receiving better rates previously.
Currently, 56 Nationwide accounts pay 0.75 per cent or more. By the time the building society is done with this latest round of cuts on 15 May, just seven will, and all of those will have seen cuts of at least 1.5 percentage points.
Meanwhile by July a total of 109 savings accounts from big banks Barclays, First Direct, HSBC, Nationwide, NatWest and Royal Bank of Scotland will pay 0.01 per cent.
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