Savings rates have biggest monthly drop since 2009 as banks bet on rebound
Fixed savings rates have clocked their biggest monthly drop in nearly 15 years, new figures show, as banks slash deals to compete for business and stay optimistic on an economic rebound this year.
The average one-year fixed bond fell for a third consecutive month to 4.87 per cent in January – the first time it has dropped below five per cent since last July – according to data from financial information website Moneyfacts.
Meanwhile, the average longer-term fixed bond fell for a fourth straight month to 4.46 per cent.
Both of these changes mark the biggest month-on-month drops since February 2009.
Fixed ISA rates also fell for a consecutive month in their biggest monthly falls since March 2009.
The average one-year fixed ISA fell to 4.72 per cent, while the average longer-term fixed ISA rate dropped to 4.32 per cent.
“This will no doubt come as a shock for savers who use these accounts to earn a guaranteed return on their hard-earned cash and have waited a couple of months to invest,” said Rachel Springall, finance expert at Moneyfacts.
“However, despite these falls, it is worth noting that average rates are higher than they were at the start of 2023, so many coming off a fixed rate will find better returns today if they want to lock into a deal of a similar term.”
She added: “As we start a new year it is the perfect time for savers to review their existing pots and switch if they are not being paid a good return for their loyalty.”
Providers have been slashing their savings rates in recent months to compete for deposits as consumers adapt to a high interest rate environment.
Despite confidence wobbling on higher-than-expected inflation figures last week, experts expect the economy to rebound and the Bank of England to bring interest rates down from a 15-year high in the second half of 2024.
Springall noted: “Providers will be looking closely both at their interest margins, the swap market and their own position in the top rate tables against their peers. Swift movement can take place if they are sitting way ahead of their competition or if they are drawing in too much in deposits.”