Times ‘ever more difficult’ for savers as rates slip

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Times are becoming “ever more difficult” for savers who have fewer products to choose from than at any time since before the last recession, research suggests.

Some 370 fewer savings products are now available compared with the start of March, according to financial information service Moneyfacts.

The total of 1,398 deals on the market is the lowest since 2007.

Meanwhile, average interest rates on those products stand at below 1%.

This list includes Individual Savings Accounts (Isas), savings accounts which allow withdrawals at any time, and accounts in which people have to leave funds untouched for a year or more.

Low rates have particularly hit those, often older savers, who may have hoped to take some interest generated from their life savings as an income.

“Clearly, some savers may struggle to feel enticed to save right now, but for those who rely on interest as a means of supplementary income, times are becoming ever more difficult,” said Rachel Springall, from Moneyfacts.

However, she said that people – even if they wanted the flexibility of an easy access account during coronavirus uncertainty – should still shop around for the best deals.

Some accounts will pay as little as 0.01% in interest, which over time would buy less and less as prices increased.

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Low rates have come at a time when many people may have been saving more money.

Data suggests this accelerated during lockdown, as households where residents were still in a job, but likely to be working from home, suddenly had less need or opportunity to spend.

Deposits into accounts by households increased by a record £25.6bn in May, following strong increases in March (£14.3bn) and April (£16.7bn), according to the Bank of England.

Money that might have been spent on commuting or meals out could have been tucked away instead.