Savings Alert: Record Number of Accounts Amid Plummeting Rates
A stark warning has been issued to thousands of individuals holding money in easy-access savings accounts. According to the latest data from financial information provider Moneyfacts, the total number of savings deals available has skyrocketed to 2,394, including ISAs. This figure represents the highest level ever recorded by the company and marks the most significant monthly increase since June 2023.
When ISAs are excluded, there are 1,726 live accounts currently on the market. This is the highest number of non-ISA savings products available in over 16 years. Furthermore, the choice of Cash ISAs has expanded for the third consecutive month, reaching a record 668 deals.
Average Rates Decline Despite Increased Choice
Despite this unprecedented surge in product availability, the average interest rates offered to savers are moving in the opposite direction. The average rate for an easy-access savings account has fallen to 2.41%, its lowest point since July 2023.
Similarly, the average rate for a one-year fixed bond now stands at 3.81%, the lowest since April 2023. The overall Moneyfacts Average Savings Rate has also decreased to 3.31%, down from 3.69% recorded a year ago.
Expert Analysis and Warnings
Caitlyn Eastell, a Personal Finance Analyst at Moneyfacts, commented on the situation. “Savers now have more choice than ever before as the number of products and providers reach record-highs. Lesser-known banks help the market grow and can be a source of innovation as they typically need to compete harder for savers’ hard-earned cash.”
However, she cautioned, “Many average rates continue to fall across the board. Variable ISAs and non-ISAs are now at their lowest levels in almost three years, while most fixed rates are at their lowest in almost three years, except for long-term non-ISAs which are at their lowest in four. It would not be surprising if the fading rate environment leaves savers disheartened, but it’s vital that they do not give in to apathy as they can still get over 4% on the most competitive accounts.”
Independent financial advisors echoed these concerns. Rob Mansfield of Rootes Wealth Management noted, “With interest rates falling back to July 2023 levels but record numbers of accounts available, it suggests banks and building societies are favouring gimmicky features rather than offering simple accounts with decent rates of interest. You have to keep on your toes to secure the best rates or risk inflation nibbling away at your hard earned savings.”
Scott Gallacher, Director at Rowley Turton, highlighted the cost of complacency. “Billions still sit in older accounts paying around 1%, which in real terms means many are going backwards. On £20,000 of savings, sticking at 1% instead of 4% costs around £600 a year - that’s the price of doing nothing.”
Philly Ponniah, a Chartered Wealth Manager at Philly Financial, advised caution. “Savers may have more choice than ever, but they need to tread carefully as rates continue to fall. Averages are sliding quickly, easy access is down at 2.41% and one year fixes have dropped to 3.81%. That tells you banks expect rates to soften further. If you are waiting for rates to bounce back, you may be waiting a while.”
She added a crucial long-term perspective. “It is also worth remembering that cash is for short-term goals and emergency funds. Over time, inflation quietly eats away at the real value of money sitting in savings. For longer term wealth building, a stocks and shares ISA can give your money a better chance to grow above inflation.”
