Savers warned to prepare for 'new era' of lower rates: We pick the top deals right now
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Savers are being warned to prepare for a 'new era' of lower returns as rates plummet.
The average savings rate fell to 3.35 per cent in January from 3.4 per cent, the lowest level since May 2023, according to rates scrutineer Moneyfacts Compare
Over the past year, the average savings rate has fallen from 3.64 per cent to 3.35 per cent.
The average easy access Isa rate fell to 2.69 per cent in January, while the average notice Isa rate fell for the third month in a row by its biggest margin since September, to 3.34 per cent.
Average easy-access rates have dropped for the first time since October to 2.48 per cent, the lowest level since July 2023, while the average one-year fix fell to 3.85 per cent, its biggest fall since June and its lowest since April 2023.
Moneyfacts said savers should now prepare for a new era of lower returns as savings rates fade from their peak.
Warning: Savers are entering into a new era of lower savings rates for longer
Caitlyn Eastell, of Moneyfacts, says: 'A new era in the savings market may be taking shape this year, as savings rates are anticipated to fade from the peaks caused by the market volatility seen over the past three years.'
Last month the Bank of England cut the base rate to 3.75 per cent and the impact of this is already being felt in the savings market, as all average savings rates have fallen for the first time in over six months.
Interest rates are expected to settle at around 3.25 per cent to 3.5 per cent. The last time they were at this level was December 2022 - at the same time the Moneyfacts average savings rate was around 2.8 per cent, whereas at the start of this year it was 3.35 per cent.
While the margin between savings and borrowing is around 0.24 per cent lower than this time last year, according to Moneyfacts.
Ms Eastell says: 'Together, this signals that current savings rates may not last and there’s still plenty of headroom for rates to fall.
'Any fluctuations against the trend are likely to be providers reacting to individual targets.'
Where can you find the best deals now?
Savers can still find rates paying more than the average savings rate of 3.55 per cent if they shop around.
You can sign up to receive instant savings alerts with the best deals landing straight in your inbox with This is Money's free Savings Alert service.
The best easy-access savings account currently pays 4.13 per cent and is offered by Shawbrook Bank.
Meanwhile, the best easy-access Isa comes from Trading 212* and pays 4.33 per cent.
On fixed rates, savers can lock away their money for 12 months to get a 4.55 per cent rate from Goldman Sachs-backed Marcus.
A saver putting £5,000 in this account would earn £227.50 in interest by the end of the one-year term.
To see all the best buy deals, visit the independent This is Money savings tables.
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