The average interest rate on an instant access savings account fell to just 0.81 per cent in December, the latest statistics from the Bank of England have revealed.

The rate is the lowest since November 2003, when the average instant access savings account rate fell to 0.77 per cent. However, the latest low of 0.81 per cent comes before the Bank’s latest interest rate reduction of 0.5 per cent comes into affect.

It is not just instant access savings account rates that have suffered though, as the average cash ISA rate also fell, to 2.09 per cent – the lowest rate since records began in 1999 – and the average fixed rate bond now stands at 3.02 per cent, the lowest since they were first recorded in 1995.

The statistics show just how much interest rates have fallen since the Bank of England began cutting them in October last year in a desperate attempt to boost the economy.

Since the end of September 2008, the average rate on an instant access savings account has fallen by 1.65 per cent, cash ISAs by 2.4 per cent and fixed rate bonds by 2.86 per cent.

And experts are warning that worse rates are yet to come, following the latest Bank rate cut. According to Moneyfacts.co.uk, 77 per cent of savings providers have announced interest rate cuts since the December rate cut, and more are expected following the January decision.

The Bank of England’s base rate now stands at 1.5 per cent, the lowest since the Bank was formed 315 years ago.

Savings account rates have already fallen to zero, as the West Bromwich bonus account offers a rate of zero per cent when the bonus of two per cent is not earned. Experts warn that others will soon be following suit.

Michelle Slade, analyst at Moneyfacts.co.uk urges that “With so many accounts now paying such low rates and the number likely to increase, savers really need to make sure they review the rate they are getting.”

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