Interest rates for millions of UK savers have sunk to a new low, according to the Bank of England. The average rate on Individual Savings Accounts (Isas) fell to 0.85% in December, down from 0.99% in November.
On instant access accounts, the interest rate fell to 0.48%, from 0.54% a month earlier. Some individual banks are paying savers as little as 0.01%, the Financial Conduct Authority (FCA) reported in December.
One reason may be that expectations about a rise in base rates continue to be pushed backwards. Many analysts do not expect a rise until 2017 at the earliest.
Six lenders, including Halifax, Lloyds and Virgin Money cut Isa rates in December. HSBC will cut rates on Monday 11 January, and Santander has announced a rate reduction will come in February.
Many banks now offer a higher interest rate on current accounts than on savings accounts, as current accounts are more valuable to them. “The big players don’t seem to need to raise money from savers,” said Anna Bowes, director of the website Savings Champion.
“The High Street banks are nowhere to be seen in the best buy tables, except on current accounts,” she told the BBC.