Are you losing interest?
Savers need to act quickly if they want to secure a decent rate of return on their money, as banks and building societies are withdrawing many of the top-paying accounts.
Leeds Building Society is the latest institution to close a market-beating account. It’s Online Access Account, paying 3.05% was closed to new customers this week.
This follows similar moves from other savings providers. Last week ING cut the rates on its leading savings product by 0.05 percentage points so it now pays just 3.00%.
Other leading savings institutions are expected to cut their rates by the end of this week, so savers are urged to make the most of deals paying 3.00% plus while they are still available.
Kevin Mountford of Moneysupermarket.com said: “We are starting to see a softening of savings rates across the board, despite there being no corresponding reduction in the Bank of England base rate.” He said banks need to attract retail deposit but are losing money on the rates currently paid. “Once one bank cuts its rate this tends to lead to a rapid spiral downwards from other institutions.”
Currently, West Bromwich building society is paying 3.06%, as are Nationwide and Derbyshire BS (part of the same group) on their online access accounts.
This will be more bad news for savers, who have seen the returns on deposit account plummet in recent years. According to Moneyfacts.co.uk just five years ago the Bank Rate was 5.75%, and the average no notice account paying 4.08%.
Today, with the Bank Rate standing at 0.5% the average no notice account is paying just 0.9%, and customers would need to deposit a sum of £11,111 to earn £100 interest a year. Five years ago they would have earned this um on just £2,451.
Sylvia Waycot, a finance expert from Moneyfacts.co.uk, said “Savers need to find an extra £8,660 to deliver the same return on their savings in an instant access account. Looking purely at the average returns today you don’t even get the same return on a five-year bond that you would have got from an instant access account five years ago. This highlights the heartbreak currently facing pensioners trying to supplement incomes and also potential first time buyers who are desperately trying to save for deposits.”
There has been speculation that the Bank of England may cut rates still further next week, down to a quarter of a per cent. Ms Waycot added: “If this should happen where will it leave savings rates?”
An excellent way of ensuring that your savings always remain competitive and that you will never drop on to a low rate again is to use a savings platform called Governor Money - www.governormoney.com.
They’ve created a new type of savings account, one that takes the pain away from switching when your savings mature, and allows you to save with multiple providers from one place.
It's one account, with choices:-
- Savings and Cash ISA products from a range of
UK providers.
- One application (ever!) and one sign in.
- Consolidated online statements, tax summaries,
and charts to help you keep track
They won’t always necessarily have the very highest rates, but you will always be assured that your savings will be on a good rate (e.g. 3.75%, 3-year fixed rate ISA), without having the hassle of having to keep an eye on them every time your good rate comes to an end.