"It’s hard to imagine that just one year ago 67% of accounts in the savings market paid 1% or more, compared to only 34% doing so today"
In November, Moneyfacts recorded 30 savings rate rises and 103 decreases, translating to around three cuts to every rate rise – with some deals fell by as much as 0.50%.
Today, less than a third (140) of the 659 savings accounts currently on the market can beat or match inflation, of which 135 (0 no notice, 3 notice, 112 fixed rate bonds and 20 cash ISAs) are without restrictive criteria.
Rachel Springall, Finance Expert at Moneyfacts, said: “Low interest rates and rising inflation will deter savers, particularly at a time of year when they can choose to spend rather than save, with almost a third of consumers planning to dip into their savings to cover the festive spend.
“It’s hard to imagine that just one year ago 67% of accounts in the savings market paid 1% or more, compared to only 34% doing so today, showing how cruel the past year alone has been on savers. Consumers will need to be savvier than ever when moving their cash to find the best possible returns. Splitting a pot between fixed rates and instant access, for instance, will give them a bit of flexibility and an opportunity to earn a higher rate.
“Savers who refrain from putting money aside to cover emergencies could be setting themselves up for a fall if a large expense arises. A decent nest egg could cover a broken boiler or unexpected car repairs over the harsh winter months, so it’s always worthwhile to keep some cash aside. If savers need their cash quickly, they must make sure that their account will give them instant access. With the best accounts paying 1%, the flexibility does mean a lower return than fixed accounts, as well as some inflation erosion.
“Inflation is expected to rise well beyond the Government’s 2% target next year, which will have a devastating effect on savings interest due to the low rates on offer. Apart from a handful of challenger banks, the savings market is starved of its competition, so anyone who relies on their savings interest will be facing some tough times ahead.”
