Savings rates are at all time lows at the moment and as the Bank of England recently decided to keep the base rate at 0.1 percent, savers are unlikely to see their returns rise any time soon. Additionally, the ONS today released the latest figures on Government borrowing and the data paints a grim picture.
Government borrowing made new records in February, with the ONS revealing the state borrowed £19.1billion last month, the highest figure seen for a February since records began in 1993.
Jason Cozens, the Founder and CEO of Glint, examined the findings and warned the debt could add to savers’ woes: “This is another deep blow to consumers and savers, although one we’ve been fearing since the Chancellor’s recent Budget.
“The record high debt, with February borrowing up 1170 percent on the year, will further erode the value of our finances and wealth.
“With interest rates at their lowest ever level, and potentially due to enter negative territory, rising inflation and the continuation of quantitative easing, could this be the final nail in the coffin of the nation’s savings?
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“This borrowing will begin to be repaid at some point and although the Chancellor’s Budget left income tax, national insurance and VAT untouched for now, we’ve already seen the creep of more stealth taxes, such as the freezing of personal tax allowances and the spike in Council Tax. Consumers are aware of the risks this poses to their savings.”
Savers have faced harsh difficulties for around a year now, with moneyfacts.co.uk recently examining how the savings market has coped as the lockdown anniversary arrived.
According to their analysis, average savings rates reached new lows as March 2021 arrived and the overall savings market contracted throughout 2020, with product choice also dipping to a new low.
Moneyfacts.co.uk detailed the average easy access rate dropped to 0.16 percent in March 2021, with the number of live savings account options (including ISAs) dropping to 1,054 this month, down from 1,402 in March 2019.
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Rachel Springall, a Finance Expert at moneyfacts.co.uk, commented on these difficulties: “Savings cuts continued to be the trend over the past month, with average easy access and fixed rates falling to new lows.
“March marks the anniversary of the first UK lockdown and the impact of the pandemic, which led to the two base rate cuts that set the market in motion to contract.
“As interest rates sit at an unprecedented level, it would not be too surprising to see apathy among savers when it comes to switching or perhaps look away from cash savings vehicles altogether and reevaluate their attitude to risk.
“We may well be seeing an uplift in accidental savers, those consumers who have amassed disposable income from the lockdown and perhaps decide to save this within an easy access account for ease.
“Some savers may do so with their own bank, but typically the biggest high street banks pay rates as low as 0.01 percent, so it is clear to see why switching is a wise move.
“Should easy access accounts be flooded with cash, we could see providers cut rates further or even pull deals entirely to cope with demand.
“Over the past two years, the average easy access rate has fallen from 0.63 percent to 0.16 percent, a record low.”
Rachel concluded by examining ISA commitments for the new tax year and where savers can turn to for their best chance of a decent return: “There are only a few weeks left until the new tax year and even though there has been a small rise in the number of ISAs this month, rates have fallen.
“The differential rate between fixed ISAs and non-ISAs remains, reiterating the necessity for savers to carefully consider their tax-free allowance and Personal Savings Allowance (PSA).
“As it stands, the average one-year fixed rate ISA pays 0.38 percent compared to 0.43 percent on a one-year fixed bond.
“Longer-term fixed rates continue to drop too, but due to market uncertainties, savers may not want to tie their money down for long.
“As the savings market remains volatile, savers would be wise to consider challenger banks, which continue to take a firm place within the top rate tables, but also be mindful that a good deal doesn’t appear to last on sale for too long.
“Savers who have existing accounts and have not reviewed them in some time may wish to do so, as they could be on a much poorer rate of interest than they expect.”