Money News

Have savings rates hit rock bottom?

Thursday, 2 April 2009

Writes Hazel Cottrell
hazel.cottrell@consumerchoices.co.uk

Savings rates have fallen to a new low, but figures suggest that the fortunes of savers could be about to turn around.

The average interest rate on savings accounts has fallen to a new low since March’s base rate cut, but better rates could be on the horizon.

Since the latest base rate cut in March, 72% of providers have announced cuts in their savings rates, with the majority opting to pass on the full cut to at least one of the accounts they offer, according to Moneyfacts (www.moneyfacts.co.uk).

This means the average savings rate on a no notice account is just 0.66%, based on a balance of £5,000. Of these accounts, 56% pay a rate of 0.50% or less and 28% pay a miserly 0.10% or less.

Michelle Slade, analyst at Moneyfacts, said that as many accounts were already paying “extremely low rates” before March’s cut, there wasn’t much further that providers could go.

She added: “Many people are predicting that bank base rate has gone as low as it can and savers will be hoping that rates now start to improve.”

Plus, despite the poor rates, she said that “savers are once again seeing real returns on their money” because RPI – the retail prices index, a measure of inflation - fell to 0% this month.

Slade pointed out that the first signs of more competitive deals are emerging. Several new best buys have been launched in the last month, including the two-year Premium Gold account from Close Brothers, which pays a fixed-rate of 4.30%.

However, with just 11% of savings accounts returning over 2%, she stressed the importance of reviewing the rate that you are currently receiving, and shopping around to get the best new deal.

Chris Eagle, commercial manager at CreditChoices.co.uk said: “If you have a reasonably sized nest egg, then it’s essential you regularly check the returns you are getting on it and compare new deals to see if you could do better.

“There are plenty of clever ways to maximise the interest you receive, including using your full ISA allowance, considering regular savings accounts and even transferring some cash to a high-interest current account.”

“Check out our top 10 tips to getting the best savings rates to ensure you keep ahead in the savings game.”

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