More than a third of savings accounts for deposits of £5,000 now pay returns of 1% or less and rates are expected to fall further this month, figures showed yesterday.
Consumers are increasingly struggling to find accounts with interest rates that are higher than inflation, and the situation looks set to get worse with the Bank of England’s Monetary Policy Committee widely expected to slash official interest rates by at least a further 0.5% this week.
Around 38% of savings accounts for deposits of £5,000 now pay interest of 1% or less, while 7.5% offer returns of just 0.1%, according to Moneyfacts.co.uk.
These low rates come despite the fact that nearly a quarter of savings providers have still not announced what reductions they will make following December’s 1% interest rate cut.
Among the 91 providers that have made announcements, 20 cut their returns by more than 1%, although 10 reduced them by less than this amount.
The latest figures available from the Bank of England show that at the end of November the average rate paid on an instant access savings account was just 1.68%, and this is before December’s 1% interest rate cut is factored in, and in some cases, may also exclude November’s 1.5% one.
But consumers could increase their returns by opting for a notice account, with these paying an average of 2.3% in November, while fixed rate bonds paid average returns of 4.03%.