Bonfire of fixed-rate savings accounts: Best buy offers up in smoke as providers blame coronavirus for pulling deals
- Some 62 one, two, three and five-year fixed-rate deals have gone since March
- Savings rates have continued to slide since the coronavirus hit Britain
- Challenger bank Aldermore pulled all its non-easy-access deals from sale
- It said the move was temporary but suggested savers wanted to keep cash on hand and not lock it away at the moment
- Here’s how to help people impacted by Covid-19
Aldermore Bank led a bank holiday barbecue of fixed-rate savings deals, scrapping all non-easy-access accounts as savings rates continue to tumble.
The bank blamed the shelving of all its fixed-rate deals on the economic impact of the coronavirus, while others also cut top notice and fixed-rate accounts either side of the bank holiday weekend.
It is likely that pattern will continue over the coming weeks, meaning savers could be struggling to find a good return for locking away cash.
Up in flames: 62 one, two, three and five-year fixed-rate bonds have disappeared since the start of March, with rates falling an average of 0.18 percentage points across the four terms
The cull means 62 one, two, three and five-year fixed-rate accounts in total – or more than one in 10 – have disappeared since the start of March, with rates across all four term lengths falling an average of 0.18 percentage points in just over two months, according to figures from Moneyfacts.
Two-year bonds have been worst hit, with 26 bonds disappearing from sale and the average rate falling from 1.24 per cent to 1.03 per cent.
The average 12-month deal only pays a smidgen less than that, 1.01 per cent, meaning it may make little sense to fix for an extra year.
Over the last few days it is one-year fixed-rates have been most in the firing line, although the best rate still remains at 1.53 per cent for now.
Marcus Bank’s one-year fixed-rate account paying 1.45 per cent, which Goldman Sachs only launched at the end of March, was pulled from sale on Thursday, while its one-year tie-up with Saga was sliced from 1.45 per cent to 1.1 per cent.
RCI Bank cut its one-year rate from 1.5 per cent on Monday, good enough for second place in our best buy table, to 1.25 per cent.
| Date | Number of available one-year fixed-rate accounts | Average one-year rate | Number of two-year accounts | Average two-year rate | Number of three-year accounts | Average three-year rate | Number of five-year accounts | Average five-year rate |
|---|---|---|---|---|---|---|---|---|
| 01/03/2020 | 169 | 1.16% | 156 | 1.24% | 105 | 1.36% | 73 | 1.56% |
| 01/04/2020 | 165 | 1.11% | 144 | 1.17% | 93 | 1.28% | 60 | 1.46% |
| 01/05/2020 | 158 | 1.01% | 129 | 1.05% | 97 | 1.16% | 61 | 1.39% |
| 11/05/2020 | 158 | 1.01% | 130 | 1.03% | 94 | 1.17% | 59 | 1.38% |
| -11 | -0.15% | -26 | -0.21% | -11 | -0.19% | -14 | -0.18% | |
| Source: Moneyfacts.co.uk | ||||||||
The one-year fixed-rate market initially held up well despite two emergency Bank of England base rate cuts to a historic low of 0.1 per cent in mid-March.
The top rate has only fallen 0.07 percentage points since then, but the number of accounts paying 1.5 per cent or more has thinned out and rates are buckling, with providers slowly reducing rates on one-year offers.
Meanwhile RCI Bank cut its two-year fixed-rate from 1.65 per cent, the best in our tables, to 1.45 per cent, Close Brothers pulled its 1.6 per cent-paying account from sale and Vanquis Bank cut its offer from 1.55 per cent to 1.25 per cent.
Although some banks are still offering rates more than 10 times the base rate, the cuts coupled with a cheap Bank of England funding scheme are weighing on savings rates.
The economic shutdown caused by the virus also means banks are lending less, reducing their need for new deposits from already rate-starved savers.
That many businesses are simply borrowing to survive has hit banks which offer asset financing or other small business lending, which often populate our fixed-rate best buy tables, while those involved in commercial or residential property development are also less in need of savers’ money at the moment.
Banks further down our tables have also made cuts to their fixed-rate bonds over the last week, but none as notably as Aldermore, which has pulled all its fixed-rate bonds and Isas from sale, despite many of them not being close to best buy levels.
But it kept its 1 per cent easy-access account, which sits in joint-seventh place in our tables.
It suggested easy-access deals were more popular among savers at the moment.
The bank said the move was temporary, and that ‘as the current market continues to adapt to the ongoing coronavirus situation, we are taking the temporary measure to withdraw selected products to new customers as we assess the market position.
‘Like many others in the sector recently, we are constantly reviewing and monitoring our products to be in step with the rapidly changing economic conditions and the need to react quickly to this.
‘We will seek to re-introduce a broader savings product offering to new customers as the current environment evolves.’