The banks giving savers ZERO interest: As the Bank of England says rates may turn negative, there are already hundreds of accounts paying 0.01%
- Some 214 easy-access accounts pay savers 0.01% and six pay nothing
- Savings rates have tumbled over the last few months due to coronavirus
- Average rate has fallen from 0.62% last May to 0.32% this year
- Big banks have reacted to two Bank of England base rate cuts by slicing savings rates to as low as 0.01% – £1 interest on £10,000 in savings
- Here’s how to help people impacted by Covid-19
More than 200 savings accounts now pay savers just 10p of interest in a whole year for each £1,000 tucked away, while one building society has recently cut the rate paid to customers to nothing.
The figures calculated for This is Money come as the Bank of England warned yesterday that base rate could turn negative, which in turn could make receiving a return on savings even trickier.
Those who hold money in Vernon Building Society’s instant access account, which was cut from 0.05 per cent interest to 0 per cent at the start of May, are earning £105 less interest a year on £10,000 of savings than they could be with the top easy-access accounts around.
That best buy rate of 1.05 per cent is offered by Marcus Bank and RCI Bank – but even these top rates have crumbled in recent months.
Empty: The average interest rate savers earn on their deposits has nearly halved over the last year, and some banks pay almost nothing at all
The millions of savers who leave their money languishing in old accounts offered by the UK’s biggest banks and the Post Office will earn little more than nothing, as they pay just 0.01 per cent interest, or £1 on £10,000 of savings.
Since the Bank of England announced two cuts to its base rate in eight days in March, which took it to its lowest-ever rate of 0.1 per cent, savings rates have fallen.
If the Bank cut interest rates below zero, which Governor Andrew Bailey told MPs yesterday he was not ruling out, things would get even worse for savers.
This is because Britain’s banks would be charged money to hold it with the central bank, a move they would almost certainly pass onto already hard-pressed savers.
The average easy-access account paid 0.62 per cent last May, according to data from Moneyfacts.
A year on, it has nearly halved, with the average account paying just 0.32 per cent, while the amount you can earn from the best-paying savings account falling 0.45 percentage points.
The biggest reason for such a collapse, with the average rate falling from 0.51 per cent to 0.32 per cent between April and May alone, has been a raft of savings rate cuts from the UK’s biggest banks.
| Date | Average easy-access rate | Interest earned on £10,000 |
|---|---|---|
| May 2019 | 0.62% | £62 |
| March 2020 | 0.56% | £56 |
| April 2020 | 0.51% | £51 |
| May 2020 | 0.32% | £32 |
| Source: Moneyfacts | ||
Already paying little interest to savers, they took the opportunity of the base rate cut to slash savings rates even further.
Currently there are 18 on-sale accounts paying 0.01 per cent, including easy-access offers from Halifax, Lloyds Bank, Nationwide Building Society, NatWest and RBS.
But by July, the UK’s six big high street names will have made 110 cuts to savings accounts announced since the Bank of England’s decisions that will take the rate paid on them to just 0.01 per cent, according to analyst Savings Champion.
| March 2020 | May 2020 | |
|---|---|---|
| Number of available savings accounts | 1,768 | 1,548 |
| Number of available tax-free Isas | 417 | 336 |
| Average easy-access rate | 0.56% | 0.32% |
| Source: Moneyfacts | ||
Many of those cuts were already made throughout late April and early May, with 214 on-sale and closed accounts paying just 0.01 per cent as of 10 May, Savings Champion said.
Santander is cutting the rate on its everyday saver from 0.35 per cent to 0.01 per cent on 7 July and HSBC is cutting the rate on its flexible saver on 17 June from 0.1 per cent to 0.01 per cent.
Six accounts currently pay savers nothing at all, but apart from Vernon Building Society’s account which was recently cut they paid this rate this time last year and are all accounts with private banks or linked to an offset mortgage.
| Bank | New easy-access interest rate | Interest earned on £10,000 |
|---|---|---|
| Barclays | 0.01% | £1 |
| Halifax | 0.01% | £1 |
| HSBC | 0.01% | £1 |
| Lloyds | 0.01% | £1 |
| Nationwide | 0.05% | £5 |
| NatWest | 0.01% | £1 |
| Santander | 0.2% | £20 |
| Marcus (best buy rate) | 1.05% | £105 |
| Source: Savings Champion | ||
While the best easy-access accounts currently pay 1.05 per cent, or £104 more a year in interest on £10,000 in savings than a standard easy-access offer from a major high street bank, there is concern that rates could fall below 1 per cent.
Such has been the shock to the savings market caused by the coronavirus that top-paying accounts from as little as six months ago are already having their rates cut, something which doesn’t usually happen for at least a year.
Coventry Building Society’s triple access saver paid 1.46 per cent last November, but today pays 0.81 per cent.
One savings boss of a bank which frequently features near the top of This is Money’s best buy tables said the current state of the savings market was ‘unprecedented’.