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Savings rates are falling at lightning speed and some providers in particular are testing my patience.
I had expected some cuts in the savings rate following the Bank of England’s cut in the base interest rate earlier this month from 5.25 percent to 5 percent.
But what is impressive is the speed of the falls: it is almost as if the suppliers had planned them for months.
Remarkably, some banks have even cut rates more than once since the base rate fell. Easy-access accounts that paid 5 percent or more have disappeared.
Crash: Savings rates have fallen alarmingly fast since the Bank of England cut the base rate to 5%
The best rate right now is just 4.9 per cent at Close Brothers Savings, but you need £10,000 to open this account.
For now, Ford Money’s Flexible Saver is still paying 4.75 per cent. Hopefully that will come down now that it pays one of the highest rates on a minimum of £1 with no withdrawal restrictions.
Fingers crossed that the cut will not be more than 0.25 percentage points, in line with the cut in the base interest rate.
Only Family BS Online Saver, launched yesterday at 4.82 percent, Family BS Market Tracker (4.76 percent), Secure Trust Access Account (4.81 percent) and Cahoot Sunny Day Saver pay more.
The Cahoot account pays 5.2 per cent on up to £3,000, but only for one year, after which the money is transferred to your savings account, where the rate is 1.2 per cent.
I’m also keeping a close eye on Marcus, which cut its fee to 4.3 percent for new clients earlier this month, from 4.55 percent including the bonus.
Existing account holders will feel the pain starting August 23. A 0.25 percentage point drop, in line with the base rate cut, does not seem far-fetched.
However, the bank did cut its interest rate from 4.75 percent in June to 4.55 percent, although there was no change in the base rate. The two cuts amount to a total of 0.45 percentage points lower, which is hardly acceptable.
However, it may still be one of the most competitive accounts as other providers continue to reduce their prices. Therefore, I will wait until the market stabilizes before deciding whether to move my money or not.
It looks like the best easy-access online accounts will remain at around 4.6 per cent until the base rate moves again. I’m keeping a close eye on Ulster Bank’s loyalty savings scheme.
It pays an attractive 5.2 per cent on £5,000 or more, but this is due for a big cut in October, when the rate will fall 0.45 points to 4.75 per cent.
Among the larger building societies, Coventry, Yorkshire, Skipton, Leeds and Principality have all announced some rate cuts, mostly of up to 0.25 points.
For example, the Skipton Easy Access Saver rate falls from 3.8 per cent to 3.55 per cent, and the Coventry Easy Access Saver rate falls from 3.1 per cent to 2.85 per cent next month.
The cuts are unwelcome, but the rates are still much higher than what you would earn at a traditional bank. In this case, the value of savings is eroded in real terms, as these providers pay less than the inflation rate of 2.2 percent.
Cuts so far include NatWest, where its easy-access Flexible Saver card pays 1.6 per cent on balances up to £25,000 from 29 August.
Royal Bank of Scotland’s Flexible Savings and Instant Access ISA plans will also fall to this level.
Barclays’ Everyday Saver will fall to 1.51 per cent, while Lloyds Easy Saver and Halifax Everyday Saver will fall to 1.3 per cent.
Meanwhile, Co-op Bank’s Smart Saver rate will fall to 1.75 per cent from October, and Metro Instant Access Savings will pay 1.4 per cent from the start of next month.
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