Coronavirus uncertainties have hit the savings market hard with deals disappearing and selected rates being slashed to 0.01%, new data reveals.
The savings market has experienced the largest pull of products month-on-month on record according to the Moneyfacts UK Savings Trends Treasury report.
The average rate for easy access savings accounts now stands at 0.44% after base rates fell from 0.56% in March to 0.51% at the beginning of April.
NatWest, Halifax, Lloyds Bank, and Scottish Widows Bank, have all slashed their easy access rates to just 0.01%, based on a £10,000 deposit.
The start of the tax year in April usually brings new ISA deals on savings accounts offering tax-free interest payments.
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However, the market has fallen by almost a fifth. At the start of March there were 90 ISA providers offering 417 accounts, but by the end of the month there were 86 providers offering 340 products.
Average ISA rates have also fallen to 0.79%, from 0.83% in March 2019. This is the biggest month-on-month drop since November 2019. Experts suggest that these changes may just be the beginning, as it can take up to three months for a base rate change to be passed onto savings accounts.
Rachel Springall, finance expert at Moneyfacts, said: “Savers will be disappointed to find that deals are being... and this vanishing act is clearly due to the base rate cuts last month and uncertainties surrounding the COVID-19 pandemic.
“Providers are perhaps struggling to sustain their lucrative offerings or are pulling deals because they have crept up the top rate tables unexpectedly, resulting in a domino effect of cuts or withdrawals.
“We have not seen such sights since 2012, and this stark drop in savings products echoes when the Funding for Lending Scheme took its toll on the savings market — whereby providers no longer felt the need to rely on their savings deposits to fund their future lending.”
Springall said the Term Funding Scheme, which came into being in 2016, and the most recent Term Funding Scheme with additional incentives for SMEs scheme (TFSME) launched last week will no continue the legacy of a less competitive savings market for the next four years, as providers are able to borrow cheaply from the government.
“To add insult to injury for savers, ISA season was lack-lustre as the choice of deals fell by a fifth between the beginning of March and April, giving savers a very small window of opportunity to take advantage of new deals in the run-up to the new 2020/21 tax year. Interest rates have also fallen, with the average easy access ISA rate experiencing its biggest month-on-month drop since November 2019.”