Mortgage rates have gradually been falling as competition returns to the market, but savings rates have been paying the price, according to analysis by Moneyfacts.
While borrowers have been enjoying cheaper mortgage rates, savers have seen their returns dwindle, earning them 23.3 per cent less than nine months ago.
The average one year fixed rate savings account has gone from offering an average 3.23 per cent nine months ago to 2.62 per cent today; falling two, three and five year fixed rates are paying 18.5 per cent, 18.2 per cent, and 15.8 per cent less, respectively.
Moneyfacts found that 29 per cent of savers are looking to save an average £36,872 in a fixed rate bond – nine months ago this would have accrued £1,209, but now it will bring in £978.
Commenting, Michelle Slade, spokesperson for Moneyfacts.co.uk, said that as providers "strive to attract new business by reducing mortgage rates, they are in turn cutting savings rates to balance the books."
Many savers will be choosing a short-term savings account while uncertainty continues to surround the Bank of England base rate, and are consequently being punished with the biggest rate reductions, she said – an all time low for a one year fixed rate bond – and inflation is eating into what meager returns savers can find.
The Budget offered little hope for savers, who were "left bitterly disappointed," Ms Slade continued, "and many continue to feel their needs have been forgotten during the credit crisis."
To counteract the effects of falling interest rates as much as possible, Ms Slade urges savers to compare savings accounts and "review their portfolio regularly to ensure they are receiving competitive rates."
© Fair Investment Company Ltd