Money box

For savers, falling interest rates have been something of the norm in the past year.

By and large, this can be attributed to the fact that the Bank of England has held bank rate at 0.1% for some time, giving high street banks little incentive to go higher.

If you looked for online or app-only products, there were still a few good options, however.

But in the last couple of weeks, even these have been dropping like flies amid the ongoing coronavirus pandemic.

The government-backed National Savings and Investments (NS&I) was one of the first to (quite dramatically) drop their rates – their Income Bond crashed from a market-leading 1.16% AER to just 0.1% AER recently.

Marcus, another market leader, started dropping their rates in May this year. It went from 1.2% AER to 1.05% AER, then to 0.7% AER and now to 0.5% as of next week.

It’s hard to recall another provider dropping rates quite so frequently – but that’s because they’ve simply been withdrawing their products altogether.

Coventry Building Society, for example, pulled its Double Access Saver after just a week and then swiftly introduced another version with a lower interest rate. And it’s not alone in that respect.

What it means for you…

Two things are clear.

First, there are a lot of savers out there who aren’t comfortable putting their money elsewhere, such as into an investing or peer-to-peer lending product. Which is fair – you want at least your emergency fund to be easily accessible.

Second, banks – high street or otherwise – are facing a lot of uncertainty right now, and for some the effects of the pandemic is beginning to bite, which means more products will be withdrawn without notice and interest rates will continue to drop.

For both of these points, I suggest three solutions.

First, if you spot a savings product with a good rate, snap it up. You can pay in the minimum and top it up later.

It’s worth doing as some products will stay at the rate you opened them at. This is true for regular savers, but it can also be true for instant access accounts.

Second, shop around. There are a lot of comparison sites that pick out the best interest rates in any category, but it’s worth bearing in mind that banking products can be convoluted and may not fit into a single category.

For example, several comparison sites are currently suggesting Atom’s Instant Saver, at 0.5% AER, as one of the best buy options right now.

But actually, there are other products that offer higher interest rates and are instant access too.

Take the Virgin Money current account for example, which offers 2.02% AER up to £1,000. Or Nationwide’s Start to Save, which offers 1% AER for a set time period – you can save up to £100 a month and withdraw your money any time without penalty, though you have to commit to paying in every month.

This brings me to my third and final point. You can mix and match your products. If you have cash to spare, there is no reason why you can’t fill each of these products up to their limit to take advantage of the higher interest rates. Don’t just automatically stash it in one place, move it around to take advantage of the best rates.