As far as the savings market was concerned, the first half of 2016 was a total wipe-out. In fact, research from Moneyfacts.co.uk shows that, since the start of the year, savers have witnessed a vast number of rate cuts, which have caused rates to plummet to new lows. For example, the average five-year fixed rate has fallen by a whopping 0.63% since January this year.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:

“Savers have been fighting an uphill battle to get a decent return in the first half of this year; over 900 individual cuts to savings rates have occurred since January, which is shocking considering that there have only been 111 rate increases over the same period. As a result, it’s not surprising that many have begun to wonder if the cuts will ever end.

“The positive competition kick-started last year by the challenger banks sadly proved to be short-lived. The harsh reality kicked in during the early months of 2016 and rates subsequently fell to record lows. For example, the average two-year fixed rate has dropped from 1.79% in January to 1.39% today.

“Providers at the top of the Best Buys are pounced on by savers who are desperate to secure a decent interest rate, and as a result, these deals rarely remain on the market for long. Therefore, providers who want to be at the top of the market only need to offer a reasonable return to move into prime position.

“The fall in SWAP rates has also had a negative impact on the fixed savings market. A drop in these rates means that it’s now cheaper for providers to fund their mortgage book, which has led to a drop in longer-term investment rates. Quite simply, providers don’t need savers’ funds, so they don’t need to compete in terms of interest rates.

“Mark Carney’s announcement that the Bank of England Base Rate could fall past its record low of 0.50% in the near-future means that savers need to brace themselves for even tougher times ahead. If a good deal is to be secured, savers will have to shop around and work hard, and keep a close eye on the market.”

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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