2019 has undoubtedly been a tough year for savers, bringing to a close a challenging decade which will be remembered for the dual headwinds of historically low interest rates and persistent economic uncertainty.
In the midst of the ongoing Brexit saga, and with 2020 just around the corner, we review the savings landscape over the last 12 months and consider what the new year might bring.
Savings trends of 2019
Inflation has remained low throughout the year, providing the opportunity to earn more interest income in real terms. However, market average fixed term deposit rates have fallen, and banks have withdrawn products, leaving depositors with fewer options to choose from.
Despite the decline in both fixed term deposit rates and accounts, Bank of England statistics show a significant increase in the total amount of money held by UK households. In April this year, UK households’ money holdings increased by £4.7 billion, above the £3.8 billion average of the previous six months.
While the amount of cash deposits has increased, depositors are choosing to keep their money close at hand. Many have pulled cash out of fixed term accounts and have increasingly opted for easy access accounts. These trends have been largely influenced by Brexit-related uncertainty.
The good news is that these easy access accounts have proved resilient to the ambiguous political and economic climate, and while fixed-term rates have been in decline, notice account rates have risen, providing both flexibility and greater earning potential.
In a nutshell, the trends of 2019 have forced depositors to navigate the complexities of seeking and securing inflation-beating returns, while meeting their preference for keeping money accessible.
What’s on the horizon in 2020?
Recent events suggest that 2020 will not get off to the best start. The news that the UK’s ‘scheduled’ departure from the European Union was once again postponed, further fuelled speculation that a cut to the Bank of England base rate is imminent.
As pressure mounts, the Bank signalled that the base rate could be cut to 0.50% next year and held at that rate until 2022. If this happens, deposit rates will decline even further in the new year.
Preparing for what’s to come
Although the current cash deposit market remains challenging, there are still plenty of attractive deposit rates to take advantage of but given the direction of travel for rates and the anticipated base rate cut in the new year, now is the time to review your cash holdings.
Whilst nobody can be certain of what lies ahead, a number of commentators have suggested that savers should lock in a fixed-term cash deposit rate now before rates potentially fall further.
The process of identifying the best rates and opening new accounts can however be time-consuming and onerous. Addressing these challenges, Flagstone provides access to exclusive and market-leading rates from a choice of 38 banks and building societies on completion of just one application.
Individual and joint savers as well as company and charity finance directors can open multiple accounts in a matter of minutes (rather than days or weeks), then manage all of these accounts using one simple dashboard.
What’s more, Flagstone clients can move their cash to new accounts with ease, to take advantage of the best rates available at any time.
Fixed term deposit rates currently available on the Flagstone platform include:
- 1.95% AER/Gross for one-year fixed term deposits1
- 2.25% AER/Gross for three-year fixed term deposits1
- 2.50% AER/Gross for five-year fixed term deposits1
By securing these market-leading rates now, savers can protect their cash from falling interest rates in the short term and increasing inflation in the longer term.
1 Correct as at 25th November 2019.