Savings rates slashed by nearly two thirds during pandemic

Easy-access savings rates and Isa equivalents have been severely hit by the coronavirus pandemic, and each month are setting new lows, data shows.

Average savings rates have been slashed for the fifth consecutive month, according to comparison website Moneyfacts. 

Since the start of March, the impact of the coronavirus and subsequent base rate cuts have seen typical returns plummet with easy-access accounts being cut by nearly two thirds from 0.56 per cent in March to 0.22 per cent this month.

Meanwhile, easy-access Isa rates have tumbled from 0.83 per cent to 0.32 per cent.

Notice accounts and short-term fixed-rate tax-free deals have also been hit with cuts of more than 50 per cent.

One-year fixed bonds, longer-term fixed bonds and longer-term fixed Isas have also reduced by at least a third.

This means that all average savings rates are at their lowest point since Moneyfacts electronic records began in 2007, as notice accounts have now hit a record low this month. 

Rachel Springall, finance expert at Moneyfacts, said: ‘As the UK enters a recession for the first time in 11 years, consumers may be looking to put aside some cash for an emergency fund in response.

‘Since the UK lockdown, savings rates have plummeted to record lows across the board, so prospective savers may be disheartened with the current rates on offer.

‘The impact of the coronavirus pandemic and subsequent base rate cuts has caused a rate-cutting trend among savings providers and while this is expected to slow down, there are few signs of the market making a U-turn any time soon.’

The choices now available to savers are limited, despite a small rise in the number of savings account options, with 366 fewer deals available than the start of March.  

Despite the pitiful returns on offer, since January, more than £50billion has been poured into savings accounts, according to deposit data from the Bank of England. 

For those looking for the best deal, at present, the top rate offer for easy-access accounts comes from NS&I which pays a top rate of 1.15 per cent on its monthly income accounts with a minimum deposit of £500. 

This is despite average rates for easy-access accounts continuing to fall this month to a new low of 0.22 per cent, with most of the biggest high street banks paying 0.01 per cent.

Springall adds: ‘Challenger banks may still attempt to entice new savers over the short-term to fund their future lending – proven in recent weeks by one-year fixed bond competition in the top rate tables – but it is unknown whether this will continue over the coming months.

‘The average one-year fixed bond rate has fallen by more than a third since the start of March, so even if a few deals improve, there will need to be a market-wide movement to return to the rates seen pre-lockdown.

‘As more cash could flood the savings market, providers will need to act quickly to cope with demand and they could pull offers entirely if subscription levels fill too quickly, but this could well lead to a domino effect of other providers following suit.

‘Savers who may wish to put away any disposable income amassed during lockdown will need to act quickly or be left disappointed.’