This month marks the one-year anniversary of Bank of England base rate cuts and the start of the first UK lockdown. During this time, consumers would have seen notable changes whether they are a saver or borrower, and the latest analysis from Moneyfacts.co.uk reveals how the landscape has changed a year on and what may be yet to come.
Savings rates have plummeted to record lows as providers have cut and pulled offers over the past year. A large inflow of savers’ cash could further cause providers to review interest rates as deals could be oversubscribed.
Mortgage product availability fell dramatically last year, limiting choice for first-time buyers or those looking to remortgage with a small deposit. Product volumes are slowly returning, but 5% deposit deals are still few and far between.
Consumers with card debts will find less choice to make a balance transfer on an interest-free offer and those using an overdraft may be better or worse off compared to this time last year. More card offers could be tightened as caution remains.
Rachel Springall, Finance Expert at Moneyfacts.co.uk, said: “Savers searching for the best possible return for their cash will be disappointed to see interest rates have fallen to record lows over the past year. Consumers may well have put away more cash during lockdown, but before then the impact of the Coronavirus had initiated two base rate cuts in March 2020, which combined with a subsequent drop in competition, decimated the savings landscape.
“One of the most popular savings vehicles are easy access accounts and it would not be surprising to see savers continue to favour deals where they can get instant access to their cash. However, as the average rate on easy access accounts has dropped to 0.17%, some savers looking for a better return may need to review their options, such as with a fixed bond, but keep in mind that these vehicles have also seen large rate cuts.
“It is hoped that competition will return to the saving market, but it will no doubt be a steady process and not an overnight sensation. Savers would be wise to take advantage of any tax-free savings vehicles or Government initiatives such as the Help to Save scheme in the meantime and of course any plans for a new Government-backed NS&I savings deal to help combat the deficit.”