Savings rates plunge following base rate cuts

Recently released figures have shown that the average rate of interest paid on savings accounts has plunged as a result of the falling base rate, and according to the Bank of England the figures released do not yet include any effects from the two most recent base rate cuts in December of last year and January of this year.

The Bank of England figures showed that in December the average rate of interest paid on instant access savings accounts from banks and building societies fell to a five year low, standing at 0.81 percent. The average rate of interest paid on notice accounts fell to a record low, at 0.82 percent, as banks and building societies imposed the series of rate cuts that have been taking place since October.

One industry official stated: “The figures are no great surprise. Rates have been coming down quite dramatically in the last four months. This proves that savers are being penalised at the moment and are struggling to find accounts that pay good returns.”

Interest rates on instance access accounts last spring, when the base interest rate stood at 5 percent, were coming in at an average 2.19 percent, with interest rates on notice accounts in the same period average 2.99 percent. However, interest rates on savings have now plunged, and many predict that they will fall further, as the base rate is likely to be cut again.