Savers braced for 'tougher times' as rate cut considered

Savers have faced "an uphill battle" when searching for a good interest rate and must brace themselves for "tougher times ahead", an analyst has said.

Financial information service Moneyfacts said that returns on popular savings schemes have fallen since the start of the year.

It said there had been more than 900 cuts to savings rates since January compared with 111 rate increases.

There is speculation that the Bank of England will cut rates this week.

The Bank's governor, Mark Carney, has already signalled that a cut in the Bank rate from its historic low of 0.5% is a possibility, and financial markets are speculating that the rate will be lowered to 0.25% on Thursday following the latest meeting of the Bank's Monetary Policy Committee.

Watching the Bank

Analysis of the savings market by Moneyfacts shows that the average interest rate for easy access accounts, the most common form of saving, has fallen from 0.64% in January to 0.56% now.

The typical rate for one-year fixed-rate bonds has fallen from 1.43% to 1.15% over the same period.

Savers who lock their money in for two years typically receive 1.39% now compared with 1.79% at the start of the year. For those locking the money in for five years, the return is 2% now compared with 2.63% in January.

"Savers have been fighting an uphill battle to get a decent return in the first half of this year," said Charlotte Nelson, of Moneyfacts.

"Mark Carney's announcement that the Bank of England base rate could fall past its record low of 0.5% in the near-future means that savers need to brace themselves for even tougher times ahead. If a good deal is to be secured, savers will have to shop around and work hard, and keep a close eye on the market."

She added with the cost of mortgages dropping for lenders - which benefits some borrowers too - there was less pressure on banks and building societies to attract savers to pay for mortgage lending.