Savings competition dries up as most top accounts pay same rate
Consumers have little choice on top of very low rates, but experts say not to ignore savings.
14th January 2021 14:24
by Marc Shoffman from interactive investor
Consumers have little choice on top of very low rates, but experts say not to ignore savings.
Analysis of the best savings deals on the market shows rates are at record lows, with increasingly little difference between many of the top five ‘best buy’ products.
Savers are being urged to look beyond the main high street banks as the market for decent interest rates remains stagnant.
There is little incentive for banks to offer competitive deals. The pricing of these deals is mostly based on the Bank of England base rate, which is currently at record lows of 0.1%.
Additionally, banks can benefit from borrowing cheap money under the Bank of England’s term funding scheme, reducing their need to attract savers’ cash with good deals.
For example, Savings Champion data shows there is little difference in the deals on offer for the top easy access rates and fixed-rate bonds, two of the most popular savings deals.
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The top five easy access deals all pay 0.5%, with the nominal ‘best’ deal being from Atom Bank.
Similarly, the best five one-year fixed-rate bonds all pay between 0.6% and 0.65%. The top rate is from Shawbrook Bank, which pays 0.65%.
Rachel Springall, finance expert at comparison website Moneyfacts, says: “The savings market is experiencing a period of stagnation when it comes to the top rates. Over the past year, the market has deteriorated with average rates pushed to sit at record lows.
“At the moment, there is very little differential between the top rates so if we do see any market-leading deals surface, it is almost predictable for it to have a short shelf life. “
Anna Bowes, of Savings Champion, agrees that it is slim pickings for savers. But she warns against keeping extra money in a savings account from a current account provider, as this could earn as little as 0.01%.
She adds: “The key thing to be aware of is that if you have money languishing in an account with your high street bank, there are better rates to be found, even in this low-rate environment. “
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