Fixed rate savings accounts withdrawn quicker than ever

Posted on August 14th, 2011 | Categories - Savings

Recent comments by the Bank of England that interest rates may not rise until 2014 has caused concern that many fixed rate savings products could be withdrawn as banks and building societies rethink the accounts they are offering.

Over recent months the average interest rate paid on long term fixed rate savings accounts has fallen significantly, and recent comments from the Bank of England that rates may not rise for many months to come will do nothing to push up rates for savers.

The average five year fixed rate savings account now pays a gross interest rate of 3.74%, the lowest level for two years.

Fixed rates withdrawn quickly

According to the financial information company, Moneyfacts, the average length of time a fixed rate savings product stays available is just 37 days, the shortest amount of time since December 2008.

Such a short shelf life compares badly to the past few years, since the Bank of England reduced base rate to 0.5%, the length of time a product has stayed available for has averaged more than 100 days, peaking in October 2009 at 133 days.

It is often the case that competitive fixed rate deals, are quickly oversubscribed and then withdrawn, but even after taking this into account, rates are now being withdrawn more quickly than in previous months.

The speed at which savings accounts are being withdrawn is making life particularly difficult for savers, especially at a time when interest rates are being reduced.

Louise Holmes, of Moneyfacts.co.uk, said: “A number of providers have reduced and withdrawn their fixed-rate savings bonds recently, bringing average rates down. While the short-term market has remained relatively unscathed, long-term bonds, which typically pay the higher rates, have been hit particularly hard.”