UK Savers Have the January Blues

By: MoneyFacts

Data from Moneyfacts.co.uk can reveal that rate reductions in the savings market have now outweighed rate rises for three consecutive months, the first time this has happened since daily rate change monitoring began.*

In the month of December, Moneyfacts recorded just 30 savings rate rises, with only one deal posting a significant increase of 0.50%. Disappointingly, rate reductions over the same period completely eclipsed this figure, with the number of rate decreases over the month standing at 93, with some deals falling by as much as 0.55%.

While this is certainly bleak news, at least 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 0.2% during December, which means they have little to worry about in terms of savings erosion. Unsurprisingly, the vast majority of the 863 savings accounts currently on the market can beat or match inflation, and of these 661* (124 no notice, 71 notice, 256 fixed rate bonds and 210 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 £9,158 today.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:        

“It’s not been a great start to 2016 for savers - this is the third month in a row that the savings market has seen rate cuts outweigh increases.

“This time of year is usually when we start gearing up for ISA season, but ISAs have been hit hardest by December’s rate cuts, and with the new tax rules for all savings accounts coming into place in April, it’s likely that rate decreases will continue. In short, this year’s ISA season is likely to be as dull as dishwater.

“Five years ago the top five-year fixed rate bond paid 4.75% yearly, but savers fixing today for the same term would get a rate that is 1.55% lower. Savers back in 2011 would also have been able to enjoy a rate of 2.90% with an easy access account, but now the best instant access deal pays a much lower 1.65%.

“It seems providers are abandoning their savings accounts in favour of their current account offerings, which have recently been bolstered by an abundance of cash incentives to entice new customers. Savvy savers would be wise take advantage of this, as some high interest current accounts now pay returns of up to 5%.

“Sadly, the savings landscape looks set to remain bleak for quite some time yet. All savers want to do is catch a break amid the torrent of rate cuts and poor interest deals, but at the moment their only hope rests on a possible base rate rise later this year.”

Data Note* Please note that the savings product numbers only include deals that are available to all UK residents. Moneyfacts has chosen not to include products that have limited access, such as locals-only, high net-worth clients or linked products, which mean you must have an existing account to obtain headline rates. Moneyfacts has taken the view that as these accounts are not available to your entire readership, their inclusion may be misleading to your readers by directing them to accounts they may not be entitled to. We do, of course, hold all of this data should you require it. Our daily Moneyfacts savings rate monitoring started in July 2015 and is a record of live standard savings account changes, which include fixed rate bonds of all terms, all ISAs, notice accounts and no notice accounts.

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