Savers shun fixed-term deals for easy access during pandemic

The allure of being able to get to cash quickly won out in 2020, research shows.

Savers are favouring the peace of mind offered by lower-paying easy-access deals over fixed-rate products during the pandemic.

Research by data company CACI and Paragon Bank found the average easy-access non-ISA balance has increased 10% annually, from £9,995 to £10,989.

The easy-access market value increased by £53.5 billion last year, accounting for 97% of the savings market growth within that period, according to the research.

While the easy-access market grew from £496.5 billion in January 2020 to £550 billion in November, the total savings market increased by around £55 billion in that time.

The research found that easy-access savings products now account for 58% of the market.

That is despite three-quarters of easy-access accounts offering interest rates of 0.1% or less.

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Derek Sprawling, savings director at Paragon Bank, says: “With building a rainy day fund a priority for many savers, people are choosing to put that money in easy-access accounts so they can withdraw funds easily should they need to.

“However, this means that many savers aren’t receiving the most competitive rate of interest available.

“Splitting funds between an easy-access ‘rainy day’ fund and a fixed rate is a good solution for those looking to have access to money in the event of an emergency, while also ensuring they get a competitive rate on a portion of their savings.”

Savings Champion data shows the top rate on an easy-access account is currently 0.5% from Marcus Bank, Nationwide or Yorkshire Building Society.

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Anna Bowes, co-founder of Savings Champion, says: “As the name suggests, easy-access accounts are important for those who may need access to their money in a hurry – but as a result, the interest rate is generally lower than accounts with less immediate access.

“Although the best easy-access rate is currently just 0.5%, a balance of £50,000 could earn £250 rather than nothing by being switched to the best paying account.”

She warns that easy-access accounts are variable, so the rates could fall and suggests the best bet for savers is to spread money across these and fixed-term products.