More pain for savers as rates sink to new lows

Instant access savings rates are set to sink to new lows in the next few days, with most accounts paying less than 0.5 per cent and many at just 0.1 per cent.

However, savers can lock in to up to 4.3 per cent on fixed-rate bonds while new individual savings accounts are offering up to 3.5 per cent.

The fall in the Retail Prices Index (RPI) to zero this week also means that, even with low rates, some savers could once again be earning a real, after-inflation return on their cash. Others, however, who have higher rates of personal inflation will continue to struggle to keep their savings growing faster than prices.

The Consumer Prices Index (CPI) registered a surprise increase to 3.2 per cent this week as the cost of imported food and fuel rose sharply. Individuals most exposed to these rising costs, such as pensioners, could be paying 6 per cent more for their living expenses compared with a year ago, according to the Institute for Fiscal Studies.

Most of the latest round of savings rate cuts are due to take effect from the start of April, following this month’s half-point base rate reduction to a record low of 0.5 per cent.

Some accounts are being reduced by even more than the half-point, but a few are seeing only minimal cuts. And while a handful of accounts already pay no return at all, zero per cent rates are not due to become widespread, experts predict.

Kevin Mountford, head of savings at, a comparison service, said: “A number of providers feel they have taken their reductions as far as they can. There is an appetite to protect savings balances.”

Variable rates are expected to drop by an average of 0.25 percentage points across the market, but returns on some savings deals are also being maintained or even increased.

Fixed-rate bond offers have edged up from their recent lows of about 3 per cent. Savers prepared to lock their money away for up to a year can earn nearly 4 per cent, while longer-term fixes are above 4 per cent.

Nationwide Building Society has a five-year bond paying 4.15 per cent while Close Brothers has this weekend launched a two-year deal at 4.3 per cent.

Competition in the run-up to the end of the tax year is also keeping Isa rates buoyant as providers look to attract last-minute savers.

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