Settling for the ‘average’ savings account becomes even less rewarding
The Moneyfacts UK Savings Trends Treasury Report data is out today, you can find it here.
- Banks dropped the interest rates on easy access accounts in the run-up to the Bank of England base rate announcement. Many also dragged their feet when it came to raising them afterwards.
- It demonstrates how ambivalent high street banks are about raising cash from savers – and the importance of shopping around.
- It also goes to show the value of building a savings portfolio rather than leaving everything in easy access accounts.
The report shows that between October and November – just before the Bank of England raised the base rate from 0.25% to 0.5% - many banks and building societies cut the rates on easy access savings accounts and ISAs. The average rate on no-notice savings (excluding ISAs) fell from 0.4% in October to 0.39%. Meanwhile, the average rate on no-notice ISAs fell from 0.63% to 0.62%
Sarah Coles, Personal Finance Analyst, Hargreaves Lansdown:
"These figures are a salient reminder of the cost of settling for something ‘average’. If you leave your cash in an average account, you have to accept the agenda of the high street banks: they don’t particularly want money from savers because quantitative easing and the funding for lending scheme have made it so easy for them to borrow money cheaply. They therefore have no incentive to offer a better rate."
"If you shop around, by contrast, you will have seen the rates on the most competitive accounts rise since the Bank of England raised rates, and now savers can earn 1.32% in an easy access account. This is largely the result of challenger banks competing for market share."
"These figures are also a useful reminder of the improvement in rates you can secure if you consider moving at least some of your savings portfolio from easy access accounts to fixed rate bonds. At the moment, for example, the average account requiring notice is offering 0.66% (excluding ISAs). Of course, shopping around is key here too, because you can get competitive rates above 2% if you fix for two years or longer."
"It’s sensible to have between 3 and 6 months of expenses somewhere you can access easily in an emergency, but once you have this safety net, it’s worth taking a more active approach with your savings, and building a savings portfolio that is working harder for you."