Following nearly three years of a rising base rate, which increased interest rates for savers across the market, the Bank of England dropped the rate by 0.25% last week, marking the first cut since the pandemic. Now sitting at 5%, many banks are also dropping their interest rates as it’s based on the BoE’s decision.
While rate cuts can have some good outcomes for borrowers who may see their interest rates drop too, it’s usually bad news for savers as institutions will cut their rates on savings accounts first. This has seen a number of banks making speedy slashes over the last week since the decision was announced.
This Is Money found that at least 41 savings accounts had cut their rates across easy-access, fixed-rate, ISA and Lifetime ISA offerings. One of the first to move was Chip’s easy-access cash ISA which went from 5.1% to 4.84%, sliced by exactly the 0.25% the base rate dropped.
However, this rate is still competitive in the easy-access ISA market though. Zopa’s own easy-access ISA has fallen even further from 5.08% to 4.8% which will be enacted from August 19. This account, though, also includes a 0.5% bonus which is fixed for a year from the date it is opened. Zopa’s easy-access account will also drop on August 19 from 4.54% to 4.3%.
Two of Oxbury Bank’s market-leading easy-access accounts have been pulled from the market altogether and aren’t available for new customers, although people who already have the accounts will continue to receive the same interest rate. Both products were highlighted as a limited account meaning they could be withdrawn at any time. It offered 5.04% on deposits of more than £25,000 and 5.02% on balances over £20,000.
Moving into fixed-rate accounts, Union Bank of India cut its one-year fixed rate from 5.4% to 5.25% which still keeps it above market average for this product. Additionally, GB Bank cut its one-year account to 4.96% from 5.26%. Skipton Building Society has also cut its Lifetime ISA offering from 3.55% to 3.05% over the weekend.
According to Moneyfacts Compare, the top five, three and two-year fixed bonds have largely remained the same month-on-month. Although it noted that the top four-year account did fall. Comparatively, the leading one-year fixed bond on August 1st was offering 5.40% while this time last year it sat at 6.05%.
Finance expert at Moneyfactscompare.co.uk, Rachel Springall, warned Brits: “Savers sitting on the fence to invest their cash with a fixed rate bond may wish to do so quickly, as the top rates are not guaranteed to sit on the shelf for long.
“Those waiting for their bond to mature and cannot yet grab a new deal would be wise to brace for impact as rate cuts could be on the horizon. The Bank of England base rate cut is expected to slowly trickle through the savings market over the coming weeks and, while this typically impacts variable rates, the consequences can also lower interest rates on accounts that guarantee returns, like fixed bonds.”
Following years of major macroeconomic fluctuations, the money expert highlighted that the usual advice of investing more for longer in savings accounts “has not been the case”. She urged: “Savers need to act now to grab a new deal, or they could be left disappointed.”