Dozen best buy savings deals disappear

Andrew Hagger of Moneynet.co.uk looks at the latest changes in the savings market.

The bad news for UK savers just seems to go on and on, with record low rates, the axing of Child Trust Funds and changes to Capital Gains Tax potentially threatening those taking advantage of company save as you earn schemes.

This artificially low rate environment has been causing misery for those who rely on an income for their savings for at least 18 months now, and they'll be dismayed to learn that at least a dozen best buy savings deals have been pulled or had rates slashed during the last week.

There have been some cuts in the ISA market however the bulk of the bad news seems to be with fixed rate bonds, particularly the longer term products.

The chase for best buy rates continues to be fuelled by people still coming off existing fixed rates of up to 7% and desperate to reinvest at the highest rate possible. This has meant savers increasingly having to opt for longer term deals than they would have wished.

When you look back to November 2008 just before the MPC embarked on its aggressive rate cutting strategy, you could get 7.20% for a one year bond and 7.00% for a two and three year term, so whilst there are many people locked in to what in hindsight is an excellent deal, they will soon be joining the hoards of other customers chasing a handful of half decent accounts.

Until we see an upward movement from the 0.50% base rate there's little chance that savers will have anything to smile about, in fact with VAT set to rise and inflation taking chunks out of any return they manage to make, it's just more doom and gloom.

With rates at rock bottom there's little incentive to save, and many people are starting to wake up to the fact that the financial rewards are greater if they make overpayments on their mortgage or credit card borrowing.