Rates more than halve on regular savings

Regular savers have seen rates on their accounts more than halve over the past year to just 2.64% and there’s more pain to come, new analysis from MoneyExpert.com shows.

In March 2008 regular savers could expect an average return of 5.56% but now that has fallen to just 2.64% for savers committing to making regular payments for a year.

Choice has been drastically limited – the number of accounts paying over five per cent has fallen by 83% from sixty six to just eleven. And the total number of regular savings accounts has dropped by six per cent over the last 12 months.

Just one in five regular savings accounts do not impose penalties if you miss a payment – and some will turn into low-rate instant access accounts when savers miss a payment.

The reduction in the number of accounts available was predominantly due to the withdrawal of a number of small building societies. Bath Building Society have withdrawn an account which paid 5.75%, Birmingham Midshires have withdrawn an account which paid 4.68% while Newbury Building Society have withdrawn an account which paid 6.1%.

Sean Gardner, director of MoneyExpert.com, said: “Savers are bearing the brunt of the Bank of England’s efforts to stave off a prolonged recession. Their pain might be a price worth paying if the moves work but that’s little comfort if you’ve seen interest rates slashed.

“Regular savings rates are holding up against the wider market to some extent. Instant access accounts pay an average of just 0.96%, but for regular savers facing withdrawal conditions if they move their money, this will be little consolation.”

In March 2008 the lowest rate paid by a regular savings account was 3.38% with Triodos Bank but today the lowest rate is 0%, again with Triodos Bank.

There are still a number of high interest accounts available. HSBC offer a regular saver paying 10%, but in order to qualify customers must be members of their Premier banking service and have savings or investments of at least £50,000 with HSBC.

There are more widely available accounts. Abbey’s Super Fixed Rate Monthly Saver and Barclays Monthly Saver pays 6% to those looking to save between £20 and £250 a month while

While relatively high interest accounts are still available, potential customers need to be aware that in the most cases they will be punished if they do not keep up their regular saving.

Fewer than twenty per cent of accounts on the market do not impose a penalty if a payment is missed. In the majority of cases those who miss a payment will see their interest rate reduced or they will forgo the bonus paid on the account. In some cases the account will even be converted into a basic low rate savings account.