Banks and building societies have already started slashing rates on some of the best savings deals, just two days after the Bank of England announced an emergency base rate cut to 0.25 per cent.
Three of the seven highest-paying easy-access accounts have either been pulled from sale or seen their rates cut, while some of the best one, two and three-year fixed-rate and tax-free deals have also disappeared.
Meanwhile some of the UK’s biggest banks, including Nationwide Building Society, Lloyds, Halifax, and Santander said they are reviewing their already rock-bottom savings rates following the Bank of England’s biggest rate cut since the financial crisis.
Outgoing and incoming Bank of England governors Mark Carney (left) and Andrew Bailey (right) at a press conference on Wednesday morning. They announced an emergency base rate cut in response to coronavirus that took it back to its joint-lowest ever level of 0.25%
Barclays pulled its two and three-year cash Isas, paying 1.3 per cent and 1.7 per cent, from sale on Tuesday, and insisted this was standard practice and not related to the Bank of England’s decision a day later.
One senior banker at a challenger savings bank told This is Money when the cut was announced on Wednesday that they expected rate cuts to filter through quicker than usual, due to the size of the cut.
Since then, three of the highest-paying easy-access accounts have already disappeared.
Yorkshire Building Society has pulled its limited access saver from sale, which paid a market-leading 1.32 per cent.
Some of the UK’s biggest banks said they were evaluating their savings rates following the Bank of England’s base rate cut
Meanwhile the Co-op Bank has also cut its Britannia Select Access Saver from 1.3 per cent to 0.8 per cent, and Principality Building Society has removed its 1.28 per cent easy-access account from sale and replaced it with one paying 0.9 per cent.
Leeds Building Society has also removed its defined access saver which paid 1.1 per cent on balances of £25,000 or more, and 1 per cent on balances of £5,000 or more.
The best easy-access rate now pays 1.31 per cent, and is offered by Cynergy Bank and Virgin Money; though both accounts come with catches.
The rate from Cynergy’s account drops to 0.75 per cent after 12 months, while Virgin’s account only allows two withdrawals a year.
Some of the best fixed-rate deals have also been slashed as banks react to the base rate cut.
Ikano Bank has cut its market-leading one-year fixed-rate account from 1.56 per cent to 1.36 per cent, though it has quickly been replaced by challenger bank Smartsave; which can be opened online with deposits of £10,000.
Ikano has also cut its two and three-year deals, from 1.66 per cent and 1.76 per cent to 1.46 per cent and 1.56 per cent.
The joint highest-paying two-year fixed-rate deal, offered by Investec, has also been cut from 1.7 per cent to 1.6 per cent.
It means the best two-year deal is now offered by Sharia bank Gatehouse, which pays 1.7 per cent.
Up in smoke: There has been a bonfire of the best savings deals since the Bank of England cut its base rate to 0.25% on Wednesday
Challenger bank Oaknorth has cut its one, two and three-year deals.
It previously paid 1.5 per cent, 1.62 per cent and 1.66 per cent, but have now been slashed to 1.15 per cent, 1.22 per cent and 1.26 per cent, respectively.
Meanwhile United Trust Bank cut its three-year fixed-rate from 1.8 per cent to 1.7 per cent, having previously offered the joint-highest rate on the market.
It means Investec now offers the only three-year deal paying 1.8 per cent, but this is only open to those with £25,000 or more to deposit. Anyone with less than that has to make do with 1.75 per cent from Gatehouse, which can be opened with £1,000.
With a few weeks to go before the tax year end, savers might be hoping for banks to be offer better Isa rates, instead they have gone the other way.
Though they have been handed one piece of good news, with Yorkshire Building Society launching a new easy-access Isa paying 1.3 per cent, the best rate open to those who either have £50,000 or live in Wales.
It can be opened with £100 in branch or by post. However, withdrawals can only be made on one day a year.
Elsewhere, it is the same story of rate cuts.
Oaknorth has slashed its tax-free fixed-rate deals too, with its best buy one and two-year accounts being cut from 1.41 per cent and 1.51 per cent to 1.06 per cent and 1.16 per cent.
Charter Savings Bank has cut its one-year fixed-rate cash Isa from 1.35 per cent to 1.11, and Monmouthshire Building society has pulled its 1.35 per cent paying two-year deal from sale.
It means the best two-year fixed-rate Isa is offered by Sharia provider Al Rayan Bank, which pays 1.5 per cent on balances of £1,000, while the best one-year is offered by Ford Money, which pays 1.37 per cent on deposits of £500 or more.
What should savers do?
Meanwhile, mortgage rates are currently at near-historic lows, especially on deals where homeowners lock themselves in for 10 years.
Those currently on fixed-rate mortgages will obviously not see an effect until they come to remortgage, but when they do the rates they are paying could fall, if the base rate is not adjusted again before then.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘Swap rates – which banks use to price mortgages – have tumbled in recent days and both the reduction in base rate, plus lower swap rates, will lead to even cheaper mortgage products.
‘We would expect five-year pricing to fall close to its previous record low of 1.29 per cent in 2017.
‘The big question is could they fall below 1 per cent?’
Suzanne Lewsley, Ford Money’s chief deposits officer, said: ‘Although the Bank of England’s emergency rate cut is only a temporary measure taken to stabilise the UK’s economy during the coronavirus outbreak, we can expect to see a downwards ripple across the savings market.
‘The net interest margin, already under pressure from the highly competitive mortgage market, will be squeezed even further, and providers will need to re-evaluate their offerings as a result.
‘Savers should weigh up their options, and find the safest, fairest home for their savings based on their circumstances.
‘Those thinking of squirrelling their money away into a fixed term product should do so as soon as possible, as rates will likely fall in the near future.
‘Those who are unsure about locking their money away should consider easy-access accounts as they offer the flexibility to switch to a more lucrative product when the right opportunity arises.’
Rachel Springall, finance expert at Moneyfacts, said: ‘It almost seems inevitable at this stage that the base rate reduction could get passed on in full to savers over the next few months, but this then should be a signal for savers to shop around for a new deal.
‘As we have seen time and time again, the biggest high street banks are unlikely to be matching base rate – let alone beating it, so this cut is the perfect excuse to pay out less in interest to consumers.’
THIS IS MONEY’S FIVE OF THE BEST SAVINGS DEALS
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