Cash Savings Rates Halve Over 2 Years

The average easy access savings rate has fallen from 3% to less than 1.5% in just two years, despite the Bank of England base rate remaining at 0.5% for five years

Emma Wall 21 November, 2014 | 2:59PM

Cash interest rates have halved in just two years, shocking figures have shown. An index which tracks the best five paying easy access cash savings accounts revealed that in March 2012 savers could earn more than 3% on their cash deposits. But today the average of the top five best buy easy access accounts is less than 1.5%, according to the Savings Index.

There has been a steady decline in interest rates since the Bank of England dropped base rate to just 0.5% in March 2009. While a fall was to be expected after the initial drop, savers are dismayed that more than five years after the fact – while base rate has remained stagnant – savings rates continue to fall.

Two of the highest paying easy access savings accounts were pulled off the market in the past week, to be replaced with accounts paying a lower rate of interest. BM Savings withdrew its Online Extra Issue 14 paying 1.6%, replacing it with an alternative paying 1.35%. BM also withdrew its ISA Extra Issue 12 paying 1.6%, the replacement paying 1.55%. This is now the best paying easy access ISA account on the market.

There has also been a steady stream of announcements from banks and building societies announcing interest rate cuts on existing accounts.

Those few providers that have increased their interest rate offerings in the past week include Julian Hodge Bank which has upped rates on their 1, 2, 3 and 4 year Fixed Rate Cash ISAs. The 1 year ISA now pays 1.75%, up from 1.65%, the 2 years ISA has increased to 2% and the 3 year ISA now pays 2.1%. For those who can lock their money away for longer, their 4 year ISA pays 2.25%, up from 1.9%.

Good News for Savers Aged Over 50

Saga has bucked the savings trend and raised the rate on their Telephone Saver account from 1.5% to 1.55% securing its place as the best buy easy access savings account. The only catch is you have to be aged 50 or older to qualify.

“In effect, Saga replaced BM Savings at the top of the easy access table. This does also highlight the importance of knowing which providers are part of the same group and therefore share a Financial Services Compensation Scheme (FSCS) licence,” said Anna Bowes from SavingsChampion.

“BM Savings and Saga along with Halifax, Bank of Scotland, AA, Intelligent Finance, Aviva and St James Place all share a licence. Therefore only a total of up to £85,000 in cash based savings held with all of the above brands would be protected should the bank fail.”

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About Author

Emma Wall  is former Senior International Editor for Morningstar

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