Is it the end of the savings account?

Interest lows of 0.01% as recession starts to bite

‘Disheartened with what’s on offer’

SAVINGS rates have hit a record low after halving during the Covid crisis.

The rates crash is a devastating blow for prudent savers desperate to safeguard their cash as Britain faces its worst recession in 100 years.

Savers have amassed around £45billion in popular easy access savings accounts over the past four months after being forced to cut back on spending during lockdown.

Yet the average easy access rate is now just 0.22 per cent, down from 0.56 per cent in March, according to data analysts Moneyfacts.

Savers who have remained loyal to high street banks have suffered even worse cuts and are missing out on millions of pounds in interest as a result.

And experts warned of more cuts to come as providers focus instead on helping borrowers.

All major providers, including HSBC and NatWest, now pay 0.01 per cent on easy access accounts – or just £1 on each £10,000 pot.

Customers could earn 100 times more interest with the Government’s own savings arm, National Savings & Investments. Its Direct Isa currently pays 1 per cent – or £100 on £10,000 – and savers can still access their money quickly.

It is the fifth month in a row that all average savings rates have fallen. They are now at their lowest point since Moneyfacts records began in 2007.

The average one-year fixed rate Isa currently pays 0.56 per cent compared to 1.14 per cent in March. And the average easy access Isa is now 0.32 per cent, down from 0.83 per cent, according to Moneyfacts. There are also 366 fewer options for savers to choose from, with the number of accounts on offer dropping to 1,402 from 1,768 in March.

Savings rates have plummeted since the Bank of England base rate was cut to 0.1 per cent in March in an attempt to bolster the economy. Many banks and building societies began slashing their own rates within hours of the announcement.

Rachel Springall, finance expert at Moneyfacts, said: ‘Savings rates have plummeted to record lows across the board, so prospective savers may be disheartened with the current rates on offer. Choice is also limited.’

Bank of England figures show £45.3billion was deposited into easy access savings accounts in the four months to the end of June, up from £5.7billion in the same period last year.

Staying at home meant many people had more spare cash than usual as they could no longer spend on dining out or expensive holidays. Since lockdown was lifted, households – worried about economic uncertainty and rising unemployment – have retained these savings habits to build up an emergency fund.

A UK Finance spokesman said: ‘To help savers, UK Finance members have made it easier for customers to compare and switch products – we would always encourage customers to shop around for the best deal.’