Savings Account Interest Rates Slashed

Interest rates on savings accounts have been cut by as much as 0.50 per cent since the beginning of the year, as deals have been replaced or withdrawn.

According to moneysupermarket.com, the first six weeks of 2010 have “proved disastrous” for savers, as eight out of the ten top savings deals on its website have been removed or reduced.

Consequently, the average rate of its top five savings accounts has tumbled from a peak of 3.17 per cent in October last year to 2.89 per cent this month.

The biggest cuts have seen Principality replace its Regular Savings Bond paying 4.5 per cent with a new issue paying four per cent, while Manchester Building Society’s Premier Notice account, which was paying 3.31 per cent has been withdrawn.

Following these rate reductions and product withdrawals, moneysupermarket.com is warning that basic rate tax payers will need to find an account paying a minimum of 3.63 per cent to get a real return on their savings due to increasing inflation.

Commenting, Kevin Mountford, head of savings at moneysupermarket.com said: “This sudden fall in savings rates will have caught many by surprise, and coupled with December’s unexpectedly sharp rise in inflation means 2010 looks like it may be a difficult year for savers.

“There has been a good deal of public debate around the treatment of savers recently, but these moves seem to suggest things won’t be getting much better in the near future for this marginalized group.”

However, he believes that given that the base rate has remained at 0.50 per cent, 2.89 per cent represents a “good rate”, and he is encouraging savers earning less than this to consider switching before other deals are replaced.

“With the best deals disappearing daily, its vital consumers keep an eye on the best buy tables and check the small print behind any good rate advertised, especially in the run-up to this year’s ISA season.

“It’s becoming increasingly common for some of the better deals to be offered by your existing bank but this could involve tying your money in for long periods so it pays to check all the details first,” he said.

© Fair Investment Company Ltd