Savings accounts disappear

Banks and buildings societies have withdrawn almost a quarter of all savings accounts and slashed average interest rates despite being desperate to attract more cash from savers, according to MoneyExpert.com.

The independent price comparison website says that in the past twelve months the number of instant access savings accounts has decreased by 342 from 1478 accounts in January last year to just 1136 accounts now - a 23 per cent drop.

And customers aren't being rewarded for parting with their savings, either. The MoneyExpert.com analysis suggests that in January 2008 the average AER on instant access accounts was 3.76 per cent but that figure has since dropped to just 1.45 per cent.

The number of high performing accounts has also decreased. Twelve months ago a staggering 507 instant access savings accounts paid out 4.5 per cent AER or higher as banks tried to attract new investments. Now just 11 accounts pay out at 4.5 per cent or more.

MoneyExpert.com believes the falling number of instant access accounts could be due to banks' focus on long term savers as they try to improve liquidity. Many banks and building societies have been promoting bonds and other long term products in order to attract customers to deposit their cash for longer.

Sean Gardner, director of MoneyExpert.com, said: "Banks need a fresh injection of cash but they need the security of long term investments to really improve liquidity. So instant access savings accounts aren't a priority at the moment which explains why a quarter have been withdrawn completely.

"However the base rate has also dropped significantly in the past twelve months so you would expect average interest rates on savings accounts to take a plunge too.

"Nevertheless many banks and building societies aren't out of the woods yet and you'd think more would be being done to reward customers who put their money into savings accounts."

The MoneyExpert.com analysis shows there are now 1,136 instant access savings products on the market. However the financial comparison website is warning consumers with instant access accounts to watch their rates carefully, as they can fluctuate. Some 418 accounts currently pay under one per cent in interest.