Average savings rates dip below 0.1%, while mortgage rates step in to support the property market
Sarah Coles, personal finance analyst at Hargreaves Lansdown, comments on Bank of England’s reports on effective interest rates and Money and Credit, showing average savings rates dip below 0.1%.
- The average easy access rate hit a record low of 0.09% in August, and the average on new fixed accounts stuck at their historic low of 0.29%.
- Saving levels recovered to £9.1 billion. This is up from an average of £8.5 between April and June, and above the pre-pandemic average for the year of £4.7 billion. However, it’s well below the peak of £27.5 billion last May.
Sarah Coles said:
“August ushered in more pain for savers, as the average easy access rate fell to a new and even more miserable low of 0.09%. Most of us are making next to nothing in miserable high street accounts, and in such a dismal savings landscape, we can’t see the point of switching.
“Our research shows that half of savers haven’t switched account in the past five years (49%), and 37% have never switched. The most common reason for not switching is that rates are too low to bother with. The lower rates fall, the higher this figure climbs: currently 48% think it’s not worth it (up from 43% last year).
“Ironically, it’s when rates are low that switching becomes even more essential. If you don’t plan to access the cash very often, you could get 0.65% from Coventry Building Society – 65 times the typical 0.01% available on the high street and more than seven times the average rate. If you’re prepared to tie your money up for a year you could get 1.51% with Gatehouse Bank, more than 150 times the typical high street easy access account.
“The most competitive accounts tend to change quickly. Many of them are from newer, smaller banks, who aren’t looking for enormous sums of cash, so you need to get in quickly while you can.
“If you’re not getting around to switching because it seems like too much of a hassle, then it’s worth considering a cash savings platform. These allow you to switch between accounts with different banks in a handful of clicks and keep an eye on all your savings accounts in one place.“
“Rock bottom mortgage rates are underpinning the property market, because while prices have risen out of sight, cheaper mortgages have kept monthly costs firmly on the ground.
“The average rate on new mortgages fell 1 basis point to 1.82% in August, just below the average since the onset of the pandemic (1.83%), while the rate across all mortgages stuck at a record low of 2.05%. This means there are some phenomenal deals available, and a real opportunity for homeowners to cut their costs.
“Low rates, coupled with the ongoing race for space, means that while we’re expecting the market to cool slightly this autumn, we’re not expecting it to get uncomfortably chilly. One positive sign is that mortgage approvals for home purchases (which is an indicator of future demand) were still higher than before the pandemic in August, although they fell very slightly to 74,500.”
Kindly shared by Hargreaves Lansdown
Main photo courtesy of Pixabay