Interest rates have dipped to record lows across the savings spectrum in the UK.
According to Moneyfacts UK Savings Trends Treasury Report data, in December the average easy access rate fell to 0.19%, which is less than a third of the rate of 0.60% paid a year ago.
Fixed rates have also dropped with the average one-year bond paying less than half that it did in December 2019.
The report also shows that all average savings rates fell month-on-month and are at their lowest point since Moneyfacts’ electronic records began in 2007.
Product choice also fell slightly month-on-month – there are now 1,514 savings deals (including ISAs) on the market which is 312 fewer deals available than a year ago, according to the report.
This research is no surprise given that the Bank of England (BOE) has brought its benchmark rate to historic lows in efforts to support the economy amid the coronavirus pandemic.
Rachel Springall, finance expert at Moneyfacts, said: “Savings providers have had to react to an extremely volatile market this year and this has meant deals have been cut multiple times in a short space of time in some cases or withdrawn from the market entirely.”
Springall notes that in recent weeks, the easy access market has changed considerably as savers continue to flood this arena, thanks to the flexibility the accounts provide, and the recent rate cuts made by National Savings and Investments.
“The latest Bank of England statistics show that the inflow into interest-bearing sight deposits hit £7.1bn [$9.50bn] during October, a rise from £6.6bn in September, and since January an inflow of almost £70bn,” Springall continued.
“Data from UK Finance echoes that savers have built up cash reserves from the lockdown and the majority of consumers are preferring easy access accounts over a fixed term, which is understandable considering prevalent economic uncertainty. Savers may well continue to choose quick access to funds over a higher rate of interest moving forward.”
Cash ISAs have also been hit by rate cuts, with some savers even making withdrawals to cover their costs. The BOE recorded an outflow of £358m from cash ISAs in October
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