Savings rates have plummeted to their lowest ever level, with the average branch-based
notice account now paying just 0.18%.
The picture is even worse for current account and
instant access savings account holders, who now earn an average rate of 0.17%, according to the latest Bank of England statistics.
Tax-free savers are faring marginally better, with the average ISA rate now 0.96%.
Worryingly, rates look set to fall further still, as many banks have yet to factor in last week's 0.5% cut to the base rate.
Savings habits changing
With
savings rates in free-fall, it's hardly surprising that many savers are being put off. According to new research form moneysupermarket.com, one in five (21%) Britons have given up saving altogether because they no longer feel it is worthwhile.
These Brits are instead using any excess cash to overpay on their mortgage or other debts. This is certainly a savvy move, given that loan and credit card rates in particular are significantly higher than those offered on savings.
Of those still looking to set money aside, around half say they are actively seeking a more competitive rate.
This indicates a significant change in the mindset from savers, who until recently were more concerned with the security of a bank in these volatile times than the rates on offer.
Still some decent accounts out there
While savings rates are a long way off the 7.00% seen a couple of years ago, there are still a couple of decent accounts on offer.
For example, you can still get a 3.90%
one year fixed rate bond with ICICI, while instant access savers can still get around 3.00% with Abbey or Alliance & Leicester.
As for ISAs, there are still a handful of accounts paying above 3.00% (take a look at our
best buys), while
regular savers can secure a rate of up to 10% at HSBC.
The catch here is that you have to be an HSBC current account holder to qualify. If you don't want the hassle of switching accounts, you can still earn 6.00% with the
Barclays Monthly Regular Saver.
Unfortunately, a number of these rates may not be around for long - As we mentioned at the start, many banks have yet to factor in last week's base rate cut – so you should act fast.
Ensure your money is working hard for you
Moneysupermarket banking head Kevin Mountford believes savers are being punished for the mistakes of others.
“That so many are looking to find better rates at a time when you would imagine security and service would be paramount, shows just how badly savers are being squeezed,” says Mountford.
"Gone for now are the days when numerous accounts were returning over 7.00%. Now, you are doing remarkably well to find an account paying 4.00%.
"Savers are clearly being shocked into ensuring their hard earned money is working hard for them.
"Making sure your account is paying a competitive rate is always important - and needs to be balanced with ensuring savings are protected.”
