Several reports in the media seem to have been inspired by horror movies when describing the savings market in the aftermath of the Bank of England base rate dropping to 0.25% in August.
Hundreds of savings rates have since been cut – including a few of the top rates available on interest-paying current accounts.
Santander was the first to strike by halving the headline rate on its 123 current account to 1.5% AER earlier this week. Lloyds, Halifax and TSB will also follow suit by cutting current account rates in January.
Meanwhile, the best instant-access Isa rate has dropped from 1.65% AER on 1 January to 1.01% AER today. Fixed-rate Isas and traditional savings accounts have suffered a similar nosedive.
So what now for savers? Which? recently published a new online guide for those wondering whether it’s time to invest their cash savings.
But even for those who aren’t ready to invest, there are still a few options available offering some eye-catching returns.
The Nationwide FlexDirect account tops our Best Rate current account tables, offering 5% AER on balances up to £2,500 in the first year. Last month, Nationwide said it had “no current plans to cut rates”, and if you can find a Nationwide customer to recommend the account, you’ll both receive a £100 reward.
If you’re able to put a steady amount of cash every month, take a look at the regular savings accounts offering 5% AER. These accounts all require you to have a current account with the same provider though.
If you’re saving to buy your first home, the Help To Buy Isa remains a highly efficient home for your savings. You can drip-feed an initial £1,000 then £200 per month into these accounts – and for every £200 saved the government will add an extra £50 towards the purchase price of a property (up to a maximum of £3,000). Due to launch next April, the Lifetime Isa is a similar product that will also help people saving for their retirement.
I’m also keeping an eye on the development of Innovative Finance Isas. These were launched with little fanfare in April and the major peer-to-peer lenders have yet to offer these products to their customers. There’s also a bit of risk attached to peer-to-peer lending, but the returns proposed with these products could be difficult to ignore.
So it’s not all doom and gloom in the savings market. As with most horror movies, there are solutions available to end the suffering. You just have to look a little harder to find them.
Will you be changing your savings strategy in the wake of the recent rate cuts to various interest-paying current accounts? Where do you think is the best place to put your money?