Banks pile yet more misery on savers

Best accounts disappear as interest rate cut looms

BANKS and building societies are rushing to withdraw their best savings accounts ahead of an expected cut in interest rates on Thursday.

In a crushing blow to longsuffering savers, experts say the last decent deals are being ‘slaughtered’.

The Bank of England is widely expected to cut its base rate from 0.5 per cent to a record low of 0.25 per cent in a bid to boost the economy after the EU referendum. But lenders – who are already offering rock bottom savings rates – are getting in there first and pulling their best deals.

And there is little sign of a rise on the horizon, with experts saying the base rate could remain at rock bottom for a decade.

Ben Brettell, senior economist at pensions and investment giant Hargreaves Lansdown, said the 0.5 per cent rate had been termed an ‘emergency’ rate when it was set in 2009. He said: ‘I believe interest rates could stay around record lows for five to ten years – and a return to “normal”, pre-crisis levels is impossible to foresee over any reasonable timeframe.’

According to financial research firm Moneyfacts, 13 best-buy savings deals were withdrawn from the market last month.

Some of these accounts have been pulled after being on offer for just a week as providers have been unable to cope with demand from savers desperately looking for a new home for their cash.

Top deals that have been withdrawn include a seven- year fixed-rate bond paying 2.55 per cent from First Save, and a twoyear fixed-rate bond from Secure Trust Bank paying 2.2 per cent.

Other accounts that have been ditched in recent weeks include Virgin Money’s two-year fixedrate Isa paying 1.4 per cent and its one-year fixed rate bond paying 1.3 per cent. Rates across the board have also fallen to fresh lows in anticipation of a base rate cut. Moneyfacts says the average rate paid on an easy access savings account is now 0.54 per cent. In July 2007 – before the financial crisis – savers could expect a return of 4.05 per cent.

Rachel Springall, finance expert at Moneyfacts, said the decision to pull the best deals is triggering ‘panic’ among savers. She described a ‘vicious cycle’ of rate reductions as small providers have unwittingly found themselves at the top of best buy tables because of cuts by the big banks. This has prompted them to cut their rates or pull accounts as they have been unable to cope with demand.

‘Decent savings deals are facing slaughter,’ said Miss Springall. ‘Repetitive cuts are just not practical for all providers to con- tinue, so the only option left to limit the amount of cash coming in is to withdraw the best deals entirely and not replace them.

‘Savers are facing never-ending cuts to multiple types of accounts, which results in many investors jumping ship from one provider to another to get a more competitive return.’

Savers have already missed out on an estimated £160billion since the height of the financial crisis in October 2008, when the Bank of England started to slash rates to shore up the economy.

There are fears that banks may even introduce negative interest rates – charging customers to hold money in a cash account – if the Bank cuts rates any lower.

Baroness Altmann, a former pensions minister, said: ‘Savers must be worrying where this will all end. It has been a sorry tale for many years – people who struggle hard to save are getting less and less for their money. If rates get any lower, or even turn negative, many people will just put their money under the mattress.’

‘A sorry tale for many years’