Savings rate decline outstrips base rate cuts

by Gill Montia

Story link: Savings rate decline outstrips base rate cuts

New research from uSwitch has revealed that following recent cuts in the Bank of England’s base rate, around 76 savings providers have reduced interest rates.

However, while the base rate has fallen by 2.5% since November, rates on savings accounts have fallen by up to 4% on over 150 products.

According to the price comparison website, the December base rate cut alone prompted 47 providers to decrease rates on 100 savings products by up to 2.2%, when the base rate cut was only 1%.

uSwitch.com’s personal finance manager, Louise Bond, comments that the Government’s intention to reduce the base rate and fuel the economy has unwittingly provided a smokescreen for savings providers to slash rates.

Ms Bond is convinced that many of the reductions made in December are steeper than the sum of the last two base rate cuts and adds that some of the low rates now on offer are not encouraging consumers to save at a time when every penny counts.

However, most banks are keen to increase their retail deposits to reduce their dependence on money market borrowing.

Competition in the savings market should therefore be upholding rates, despite the downward direction of the base rate and savvy savers who do their research can still find opportunities to invest at returns of between 4% and 5%.