Savings accounts disappear as Bank of England prepares to cut rates

savings accounts

Best-buy savings accounts are disappearing rapidly ahead of the expected cut to base rate by the Bank of England on Thursday, reports The Guardian.

Data provider Moneyfacts said that in July 13 best buy savings deals were withdrawn from the market and have yet to be replaced.

Popular deals that have disappeared include a three-year bond from Saga, paying interest at 1.8 per cent, and one- and two-year Isas and bonds from Virgin Money. The Post Office also removed its top-paying three-year bond from sale on Friday.

There is widespread anticipation in the City that the Bank of England will make its first cut to base rate since 2009 this Thursday, cutting the cost of borrowing from its current level of 0.5 per cent to a new record low of 0.25 per cent.

Savers will be strongly affected, while mortgage borrowers are likely to benefit.

Rached Springall of said: “Decent savings deals are facing slaughter: repetitive cuts are just not practical for all providers to continue, so the only option left to limit the amount of cash coming in is to withdraw the best deals entirely and not replace them.

“Small providers that would have never envisaged being market-leaders are slowly finding themselves near the top of the market, due to other providers falling out of the best buys. This has resulted in a vicious cycle of rate reductions so that they can move to a more mid-market position, or indeed withdrawing the deal entirely due to countless applicants.”

Among the small building societies to withdraw best buy deals in recent weeks are the Buckinghamshire, the Beverly and the National Counties.

“Withdrawing the best buys is only going to cause panic among savers struggling to get a decent return, so it is unlikely we’re going to see an end to this mass exit from the best buys anytime soon,” said Springall.

But the flipside to poor savings rates is better deals for borrowers. Moneyfacts said the average interest rate on a two-year fixed rate mortgage has dropped to a new low of 2.48 per cent from 2.68 per cent a year ago.

The MPC held off reducing official borrowing costs in July. However, the committee has dropped heavy hints that it will act this week when fresh forecasts for the economy are published. Mark Carney, the Bank’s governor, warned before the referendum that voting to leave could push Britain into a recession.

The Bank’s forecasts are expected to include an unprecedented downgrade of the prospects for the British economy. In May’s inflation report, it forecast that the economy would grow by 2.3 per cent this year, but economists believe this could now be slashed to less than 1 per cent, which would be the largest downgrade in the Bank’s forecasts between inflation reports since it became independent in 1997.