Savers looking for better rates on their deposits face a stiff challenge to achieve anywhere close to the rates they would have received a year ago.
Many who placed their cash into a bonus-laden account before the consequences of the Funding for Lending Scheme struck must now find a new home for their savings if they don’t want their nest eggs to flounder.
But that’s far easier said than done. New figures from the Bank of England have confirmed that average returns on certain types of savings accounts have fallen by at least half over the past year.
Last August, the average bonus-supported easy-access savings account offered 1.53%, as institutions such as ING Direct and Santander offered 3%. Today, the average easy-access account will offer just 0.76%.
Tax-free cash ISAs, which constitute one of the most efficient forms of saving, have taken an even more severe hammering. The average ISA offers just 0.61% today compared to 1.41% a year ago – a fall of 57% in twelve months.
The catastrophic effect on savings rates by the Funding for Lending Scheme (select image for full view).
A small insurgence in fixed-rate bonds over the last month has done little to halt the decline in savings. The average return on one-year and two-year bonds has still fallen by more than a third over the last twelve months.
Only Skipton Building Society’s seven-year fixed-rate bond, at 3.5% (2.8% net), and the cash ISA from First Direct, at 3% (min. £40,000), are able to match inflation (read more).
But restrictive criteria exclude the majority of savers from these products, and First Direct has finally decided to chop the top rate on its ISA from November.
With the Bank of England Governor Mark Carney determined to maintain low interest rates until the unemployment rate falls, signs look pretty desperate for savers for the foreseeable future.
Aldermore’s 30-Day Notice Accounts currently offer 1.75%, more than one full percentage point above the average returns in these product types. For more on these and other savings accounts, check out our dedicated page today.
Keith McDonald
Which4U Editor
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