Which? analysis of Moneyfacts data found almost all of the products were from well-known building societies and challenger banks – some of which boasted market-leading rates during the savings boom of the last two years.
Here, Which? takes a closer look at how savings providers have reacted to the latest base rate cut and reveals the best accounts to move your money to.
How many savings rates have been cut?
We analysed rates on instant-access accounts (excluding those that impose restrictions on withdrawals and access) on 1 November and 15 November, a week after the BoE's announcement.
We found one in five accounts (19%) had dropped their rates or pulled deals altogether. Former market-leading providers Atom Bank and Shawbrook Bank made the deepest cuts, reducing rates on instant-access accounts by 0.3 percentage points. Monmouthshire Building Society and Post Office Money also dropped rates by the same amount.
Other popular challengers which have been known to offer top rates, such as Zopa, Chase, and Tandem Bank, made cuts of 0.25 percentage points.
What about the biggest banks?
A handful of high-street brands have also cut rates since 7 November. Rates on instant-access accounts from Yorkshire Building Society and Co-operative Bank were reduced by 0.25 percentage points, while Santander made a 0.2 percentage point rate cut on its equivalent product.
The low rates offered by the 'big four' banks haven't budged in a year. Moneyfacts data shows Barclays, HSBC, Lloyd's Bank, and NatWest currently offer 2% AER or less on their instant-access deals, the same as last November.
Rates on HSBC's instant-access Flexible Saver are now even worse. Within the last week, the bank has cut the savings rate by 0.25 percentage points, from 2% AER to just 1.75%.
Find out more:How far will savings rates drop?
Savings rates had been at record highs as a result of the BoE raising the base rate 14 times in a row between December 2021 and August 2023.
When the base rate was reduced for the first time this year in August, savings rates began to drop too. Average instant-access rates fell from 3.14% AER on 1 August to 3.03% on 1 November.
We are likely to see these figures go down further as more providers make reductions in response to the changing market. However, rates are still significantly higher than they were two years ago, when the average instant-access deal offered just 1.16% AER. In 2021, the figure was even lower, at just 0.16% AER.
Predictions that the base rate won't return to the very low levels recorded over the last decade should offer some comfort for savers worried about rate cuts.
The Office for Budget Responsibility (OBR) forecasts that the base rate will average 3.9% in 2025 and 2026. Capital Economics has similar predictions, forecasting the rate will settle at 4% at the end of next year.
It's important to remember that the base rate isn't the only influence on savings rates. Demand for a product or competition from other providers can also push rates up and down.
Is it time to switch?
avers should consider their next move. Your first option is to switch to another instant-access account paying a higher rate. You can still find the odd deal on this type of account offering up to 5% AER. But with rates falling fast, those aren't likely to be around for much longer.Opening a fixed-term account, on the other hand, will guarantee you the same rate for the duration of your bond,Our table sets out the top rates for fixed-term bonds and restriction-free instant-access accounts.
| Account type | Provider | Interest rate (AER) | Provider customer score | Minimum investment | Opening methods | Interest paid |
|---|---|---|---|---|---|---|
| Instant access | Cahoot (a) | 5% | 61 | £1 | Internet | Monthly, yearly |
| One-year fixed rate | Ahli United Bank (UK) plc (s) | 4.8% | n/a | £1,000 | Internet, mobile app | On maturity |
| Two-year fixed rate | Hodge Bank | 4.6% | n/a | £1,000 | Internet | Yearly, monthly |
| Three-year fixed rate | Oxbury Bank | 4.54% | n/a | £1,000 | Internet | Yearly |
| Four-year fixed rate | Oxbury Bank | 4.48% | n/a | £1,000 | Internet | Yearly |
| Five-year fixed rate | Oxbury Bank | 4.45% | n/a | £1,000 | Internet | Yearly |
source https://www.which.co.uk/news/article/savings-slump-rates-slashed-on-instant-access-accounts-after-base-rate-cut-aBOo99M1n7GP