While rates on fixed-rate bonds have been falling, now banks and building societies have turned their attention to easy-access accounts.
At its latest meeting at the start of November, the Bank of England Monetary Policy Committee left the base rate unchanged at 0.75%. But that has not stopped providers chipping away at the rates they pay savers.
Already, rates on fixed-rate bonds have been falling as banks and building societies look to keep their costs of raising money as low as possible. Now they have turned their attention to easy-access accounts.
Savers, disenchanted with low-paying fixed-rate bonds and facing uncertainty over the future path of interest rates, have been piling money into easy-access accounts. A huge £6 billion of new money found its way into these accounts in the last two months, bringing the total to £763 billion. Conversely, the amount in fixed-rate bonds has fallen by £423 million to just under £167 billion.
Providers have been cutting rates they pay to both new and loyal savers on easy-access accounts. They now pay as little as 0.1%. Even if your provider has not cut your rate yet, it could well do soon.
Providers can be quick to withdraw accounts or cut the rate when money pours in. They don’t want the expense of paying interest on money they can’t lend out to borrowers reluctant to take on debt at times of high uncertainty. This can create a domino effect, as once top-rate accounts disappear, pushing savers to pile into the next best deal until it is pulled too, and so on.
Patrick Connolly, from independent financial advisers Chase de Vere, warns: “If you go for an easy-access account, you need to check your rate frequently and move your money if you end up on a poor deal. Providers can cut the rate at any time and they rely on savers’ inertia not to move when they do.”
HSBC is cutting its easy-access Flexible Saver to the bone to pay 0.1% from 18 December. Nationwide now pays 0.1% on its Instant Access Saver on balances up to £10,000. It pays this miserly rate on some of its accounts no longer open to new savers, too. Meanwhile, TSB rates are down at a lowly 0.15% on its Easy Saver and e-Savings accounts.
Leeds Building Society rates on its Access Saver is down at 0.25%. Virgin Money offers savers who open the current on-sale version of its Easy Access Saver just 0.25%, against a previous 1.16%.
Even newer banks that often pay top rates are paring their offerings. Ford Money will cut the rate on its Flexible Saver to savers already in the account from 1.42% to 1.35% from 23 December. RCI Bank’s rate is down from 1.35% to 1.2%. Paragon Bank now pays 1.15% against a previous 1.25%.