Published On: Tue, Aug 11th, 2020

Savers urged to apply for best deals for easy access savings fast as interest rates drop | Personal Finance | Finance

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Putting money into the bank is a habit for many, with some choosing to make their money work harder by opting for accounts with market-leading interest rates. However, top-paying interest rates have been falling of late, exacerbated further by the Bank of England Base Rate cuts in March.

The emergency measure in response to the coronavirus crisis meant the Bank Rate dropped to a historic low of 0.1 percent.

And, last week, the Bank of England’s Monetary Policy Committee (MPC) voted unanimously to maintain the rate at 0.1 percent.

The savings market within the past decade is something which the financial product price comparison site Moneyfacts.co.uk has analysed.

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said: “As interest rates continue to fall across the sector, it is more important than ever for savers to switch if they are earning a poor return.

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“Over the years, challenger banks have consistently offered market-leading returns, even when hit by crippling external factors such as base rate cuts, economic uncertainty and Government lending schemes – which have all affected the returns available to savers.  

“It has now been eight years since the floor fell away from the savings market as a result of the start of the Funding for Lending Scheme.

“At this time, challenger banks continued to hold firm within the savings market, but it was clear to see there was more of a race to the bottom of the top rate tables overall during this time, with providers relying less on savers’ deposits to fund their future lending.

“Savers may have felt things couldn’t get much worse, but this was just the start of things to come.

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“In the years after 2012, savings interest dwindled and the only respite was seen in 2018 when the Bank of England base rate rose to 0.75 percent, the highest level seen since 2009.

“However, the damage on the savings market had already been done and many of the high street banks failed to pass on this 0.25 percent rate rise to their easy access accounts, the more popular type of account due to their flexibility.

“During this time, challenger banks held competitive positions in the top rate tables for both easy access and fixed bonds, including Islamic banks that offered attractive expected profit rates.”

So, what about the savings market at this moment in time?

“Fast-forward to now, it is clear as day to see that challenger banks are a good choice for savers looking for a competitive return on their hard-earned cash,” commented Ms Springall.

“Those looking for a guaranteed return may then wish to choose a one-year fixed bond should rates fall further.

“However, those who need flexibility in these uncertain times may turn to easy access instead, and apart from National Savings & Investments (NS&I) leading the market to draw in funds, it is the challenger banks and mutuals who are offering the best deals around.”

But, there could be a sense of urgency that’s required should savers wishing to access the current top-paying options.

“It is vital that savers act quickly to take advantage of the top rate deals and also to switch if they find they are earning a poor return, especially if they have their cash in an easy access account with a high street bank,” Ms Springall said.

“The next 12 months look uncertain for the savings market and any positive changes now could be fleeting.

“Consumers would be wise to remain vigilant and consider the more unfamiliar challenger banks if they hope to secure a lucrative return on their cash during this time.”



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