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Savings rates nosedive following base rate cut

Which? reveals the worst of the cuts

cut savings rates

The Bank of England’s decision to cut interest rates was expected to pile on more misery for savers and our analysis reveals just how quickly this has taken effect.

In the six days since base rate fell to 0.25%, 18 providers have reduced rates or withdrawn more generous accounts.

Savers had already seen many of the best savings deals removed from the market last month in anticipation of the move, but since the decision was taken last Thursday to make the first cut to base rate since 2009, many other banks and building societies have followed suit.

Savings rates fall even further

A couple of providers have even used the change in base rate as an excuse to make cuts even deeper than that of the Bank of England. Skipton Building Society, for example, has reduced rates on its fixed-rate bonds and Isas by as much as 0.51%, while Marsden Building Society now pays a meagre 0.25% on its easy-access Direct Saver, which previously offered 0.65%.  

First Direct has also written to savers informing them that two of its account will see cuts of 0.4% from 18 October.

Ditch and switch  

Anyone with an instant-access account can move their money immediately. The difference between the best and worst-paying accounts is stark, with the top instant-access savings account paying 1.45%, compared to a woeful 0.05% at the bottom.

In cash terms, you could earn an extra £140 a year by moving your money into the top-paying account, based on savings of £10,000.

Fixed-rate accounts are a good bet for more reliable returns, given the immediate cuts to instant-access accounts with more to follow.

The best of these include the one-year bond from Paragon Bank, which pays 1.55% and the three-year bond from Al Rayan Bank, which pays 1.88%. Both of these accounts require you to deposit at least £1,000 initially.

If you’re comfortable locking your money away for longer, the best long-term fixed-rate account is currently Shawbrook Bank’s 5 Year Fixed Rate Bond – Issue 22 which pays 2.2% on balances from £5,000.

Which? Money Compare tables let you search hundreds of savings accounts and cash Isa deals, combining the best rates with our unique customer scores to show you how well the providers featured are likely to treat you in the long run.

Best rate current accounts

If those rates aren’t cutting it for you, and dabbling with peer-to-peer lending or investing doesn’t appeal, a number of high-interest bank accounts offer some respite from shoddy rates on savings.

Top rates available include:

  • 5% on balances up to £2,500 with the Nationwide FlexDirect Account for one year
  • 5% on balances up to £2,000 with TSB
  • 3% on balances of between £1,000 and £20,000 with Santander 123 – but this carries a monthly fee of £5 and the bank has confirmed it is reviewing its current accounts so there is a chance that the top rate of 3% will be cut back, or limited in some way.

Find out more: best bank accounts for customers who are in credit – find a great deal

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