Santa Claus…. Where’s My Interest?

By: MoneyFacts

Data from Moneyfacts.co.uk can reveal that rate reductions in the savings market are now outweighing rate rises for the first time since daily rate change monitoring began.*

In the month of November, Moneyfacts recorded 36 savings rate rises, with only one deal posting a significant increase of 0.80%. Disappointingly, these rises were eclipsed by the 73 rate reductions that took place over the same period, with some rates falling by a massive 0.86%.

On the other hand, savers’ precious funds won’t be greatly affected by inflation: inflation statistics released today show that the Consumer Prices Index (CPI) increased from -0.1% to 0.1% during November, which means they have little to worry about in terms of savings erosion. Unsurprisingly, all of the 879 savings accounts currently on the market can beat or match inflation, and of these 732* (133 no notice, 72 notice, 313 fixed rate bonds and 207 cash ISAs) are without restrictive criteria*.

Savers who invested £10,000 back in 2010, however, will have suffered dearly from the damaging effects of high inflation, tax deductions and low interest rates of the following years. Based on the average easy access savings rate and average inflation and tax at 20%, their spending power will have dropped to just £8,889 today.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:“The savings market is certainly lacking Christmas cheer this year - the multiple rate increases we’ve been enjoying recently have now become a thing of the past, with many providers cutting rates to keep themselves out of the Best Buys. Savers are therefore fighting an uphill battle to get a great savings account, with many of the bigger banks simply turning their backs on savers’ money.

“As a result, the FCA wants to not only highlight the worst paying accounts but also force providers to prominently display customers’ rates on all correspondence. It’s hoped that this will raise savers’ awareness and motivate them to switch to more competitive accounts. However, these measures are not likely to give providers much incentive to offer better rates; instead, the onus is placed on the saver, who must switch accounts to get a better deal.

“There has been some good news, however. First-time buyers trying to save for a house deposit have had their dreams bolstered this month by the launch of the Help to Buy ISA. With some accounts offering interest of up to 4% as well as benefiting from bonus money from the Government, these deals beat all of their market competitors.

“Other savers will need to look towards the unfamiliar to achieve decent returns, as challenger banks appear to be the only providers with the appetite for savers’ funds. Anyone sitting with an account paying next to nothing shouldn’t put up with it. Instead, they should move their money elsewhere and get the returns they deserve.”

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