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Dramatic Falls in UK Savings Interest Rates

Personal_Finance / Savings Accounts Sep 19, 2016 - 10:34 AM GMT

By: MoneyFacts

Personal_Finance

Moneyfacts UK Savings Trends Treasury Report data, yet to be published, highlights that long-term fixed rate bonds and ISAs have fallen, with long-term fixed rate ISAs falling for 11 consecutive months, plummeting to all-time lows yet again.


Charlotte Nelson, Finance Expert at Moneyfacts, said:

“This month savings rates have been hit hard, with dramatic falls following on from the Bank of England’s announcement to cut the base rate to 0.25%. The long-term fixed sector has borne the brunt of the rate cuts, with the long-term fixed ISA rate down by 0.23% (to 1.15%) and its long-term non-ISA equivalent falling by 0.22% (to 1.34%) in just one month.

“This reduction in the longer-term rates reflects the uncertain nature of the markets at large, as well as providers’ lack of desire to secure longer-term funding. With a low-interest environment predicted for some time to come, institutions do not want to be caught out paying higher rates than needed in future.

“The history of the Funding for Lending Scheme is being repeated with the Bank of England introducing the Term Funding Scheme, which plans to lend to providers at a generous rate so they are able to maintain or increase their lending. The incentive for providers to use long-term fixed rates or indeed any savings rate to fund their mortgage books will be significantly diminished as a result.

“With consumer confidence in the savings market falling* many savers are now wary of fixing over the longer term and may instead be choosing to opt for an easy access account in the hope rates will increase in the short term, or utilise their funds elsewhere. This lack of demand could potentially cause the longer-term fixed market to fall even further in months to come.”

The Moneyfacts UK Savings Trends Treasury Report, out later this month, is a comprehensive monthly overview of current and historical data for the savings and investment market, incorporating written commentary alongside graphs and tables highlighting key trends.

*According to the UK Consumer Confidence Index, published by GfK 31.8.16.

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.


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