Savers in five million fixed-rate accounts due to mature this year face a big fall in interest payments, as rates reach historic lows.
As British Savings Week got underway yesterday, Which? Money research shows how current interest rates pale in comparison to those offered five years ago.
Savings rates have hit record lows in recent years as a result of the 0.5% Bank of England base rate and the government’s Funding for Lending scheme.
Interest on fixed-rate accounts has plummeted
Savers who opened a five-year fixed-rate account back in August 2008 would have been able to earn interest of up to 6.1%.
Today, however, the top-paying equivalent deal available pays 3.05%. Over five years, this amounts to £9,123 less interest (before tax) on a £50,000 deposit.
In 2008, Julian Hodge Bank offered the best rate of 6.1% on its five-year deal, but today, its five-year account pays 2.3%, a drop of nearly two thirds. Three-year fixed-term accounts have seen similar rate reductions. The best rate offered in 2010 was 4.15% – today, it’s just 2.41%.
Make the most of your savings
This week marks the fifth year of British Savings Week, which aims to encourage UK consumers to look at the best ways to save money.
While securing a decent return on your savings is a bigger challenge than ever, there’s no need to settle for a non-competitive account. You can see how much more your savings could be earning by using our free savings booster tool.
And if low savings rates have led you to consider higher-risk alternatives, such as investing in the stock market or peer-to-peer lending, take a look at the Which? beginner’s guide to investment.