Scrooge! Banks slash savings accounts that beat base rate

NEARLY one in three savings accounts is failing to beat the interest rate set by the Bank of England.

Savers have been hit by an ‘onslaught of cuts’ as banks pull some of their best deals.

In the past month the number of accounts yielding more than the BoE base rate of 0.75 per cent has fallen by 80 – the biggest drop in two years.

Analysts Moneyfacts said 572 of the 1,826 cash accounts available – 31 per cent – pay 0.75 per cent or less. HSBC, Lloyds, First Direct, Halifax, Nationwide, Bank of Scotland and M&S all offer accounts paying as little as 0.1 per cent. This equates to an annual return of £1 on a £1,000 lump sum.

With household debt rising, campaigners said meagre returns on cash are helping to destroy the savings culture.

A House of Lords report found four in ten people of working age had less than £100 in savings, with one in eight having none at all. The savings audit includes easyaccess accounts as well as fixed-rate deals that pay more interest but require customers to lock away their money – typically for between one and five years.

Rachel Springall of Moneyfacts said: ‘It has clearly been an unforgiving year for the savings market, which has felt an onslaught of cuts – and seen deals pulled from the market entirely – as providers reined in competition.

‘Startling changes have been made in both the fixed-rate market and variable market, which has seen lucrative offers worsen as a result.’

The vast majority of savers are seeing the spending power of their cash eroded because the average easy-access account pays 0.61 per cent and the Consumer Price Index stands at 1.5 per cent.

Just 184 accounts pay more than inflation, and these all require savers to lock away their money for a time.

Competition among banks in the savings market has declined because they are less in need of raising cash.

The slowing economy also means banks are predicting the Bank of England may cut interest rates in the relatively near future.

Guy Anker of Moneysavingexpert said: ‘It’s no surprise people have been put off saving with rates this low.

‘There has definitely been a steady decline across the board on savings. The best rates – as has been the case for years – are not on the high street. If your savings are in one of the big banks you will be earning a pitiful rate.’

One expert suggested that banks are reducing rates on savings accounts because they are worried about losing out from a crackdown on rip-off overdraft fees.

James Daley of Fairer Finance said: ‘Banks are looking for ways to recoup profits they will lose on overdrafts. We have now had more than a decade of rock-bottom saving rates. Savers can rightly be pretty upset that rates are moving in the wrong direction again.’

According to Moneyfacts, the top easy-access cash account is offered by Goldman Sachs, through its new retail banking arm Markus. It pays 1.44 per cent while Metro Bank’s 18-month fixed-rate bond pays 1.8 per cent. A spokesman for UK Finance, the industry group, said: ‘Interest rates for variable-rate products that are not directly linked to the Bank of England base rate move at the provider’s discretion in response to market conditions and competition for customers’ deposits.

‘We would always encourage savers to shop around and find the best deal.’