Since Valentine’s Day last year it’s been a challenging 12 months for most savers and finance directors who have seen market average rates for both instant access deposits and term deposit accounts in decline, but for those prepared to make the effort there is still much to love about the cash deposit market.
Inflation has fallen from 2.10% in July 2019 to its current rate of 1.30% - its lowest level since November 2016.
This welcome news for savers has seen the number of deposit accounts in the market that match or beat inflation rise to its highest level in nearly three and a half years. There are now 438 deposit accounts paying 1.30% or more. Whilst the majority of those accounts are fixed term deposit accounts, there are still also a number of inflation-beating instant access accounts to be found in the market for those prepared to search them out.
Importantly, this means savers and finance directors can protect the value of their deposits from the eroding effect of inflation and maximise their interest income in real terms.
The base rate remained at 0.75%
The outcome of the last Monetary Policy Committee (MPC) meeting on 29 January saw the Bank of England base rate remain unchanged. The MPC voted by a majority of 7-2 to maintain the base rate at 0.75%.
This is good news for savers and finance directors given that a cut in the Bank of England’s (BoE) base rate typically heralds a swift reduction in market deposit rates.
Although deposit rates have been falling in recent weeks, they may be buoyed in the short term by the base rate being held at its current level.
However, the fact that inflation is tracking significantly below the BoE’s target figure of 2.0% could ultimately contribute towards a decision by the MPC to cut the base rate to 0.50%. The next MPC meeting is on 26 March, so savers should take advantage of the rates currently available in the market whilst they are still on offer.
The FCA is introducing a ‘SEAR’ to benefit savers by £260m
The UK’s financial markets regulator, the Financial Conduct Authority (FCA) has expressed concern that loyal, longstanding customers are receiving poor returns on their hard-earned savings. As a result, it has proposed significant reforms to the way that banks and building societies set their deposit interest rates for easy access saving accounts.
Under the new rules, all banks and building societies will have to set a Single Easy Access Rate (SEAR) across all easy access accounts.
The aim is to improve competition in the market, encouraging providers to increase the interest rates they offer and protecting consumers currently receiving the lowest interest rates.
The FCA estimates that consumers will benefit by £260m from higher interest payments.
Good savings interest rates are still available – if you know where to look
Interest rates have fallen across instant access and fixed term deposit accounts in the past 12 months, and the market average instant access rate is now just 0.56%. However, for depositors who proactively shop around there are still exceptional rates available in the market.
For example, an instant access rates of 1.42% AER/Gross1 for individual savers and a three-month notice account rate of 1.80% AER/Gross1 for individuals, charities and businesses, are currently available through the Flagstone cash deposit platform.
Moreover, Principality Building Society, the 43rd institution to partner with Flagstone and provide accounts on their cash deposit platform, has just launched an instant access rate of 1.20 AER/Gross1 – more than double the market average rate for instant access deposits right now.
Flagstone provides access to hundreds of deposit accounts from a panel of 43 banks and building societies. With Flagstone, individuals, charities and businesses have 24/7 online access to market-leading and exclusive rates, enabling them to optimize the returns on their cash and take control… what’s not to love?
Rates currently available on the platform include:
- 1.42% AER/Gross instant access account for individual clients1
- 1.70% AER/Gross 12-month fixed term deposit account for individuals & businesses1
- 1.80% AER/Gross 95-day notice account for individuals, businesses & charities1
Clients love the Flagstone cash deposit platform as it allows them to earn more interest, reduce risk and eliminate hassle. To find out more watch this short video and click here to open an account.
1 Correct as at 14th February 2020