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Savings rates cut by up to 3%

08 October 2009 / by Andy Davies

In the past month, 27 savings products across the market have had their rates cut by up to three per cent, uSwitch.com has revealed.

The latest market analysis from the comparison website shows that despite the base rate remaining at 0.5 per cent for the past six months, savings providers have moved to safeguard profit margins by cutting rates by an average of 0.33 per cent.

This week has seen the new ISA allowance launched, enabling over 50 savers to shelter up to £10,200 from the taxman, however some providers have implemented rate cuts across their range of products by an average of 0.25 per cent.

Furthermore, savers with 'no notice' savings accounts have seen average cuts of 0.89 per cent AER in the past month, with Lloyds TSB making the biggest cut amongst providers, slashing the interest rate of its Monthly Saver Account from five per cent to two per cent.

Meanwhile, fixed rate bonds have also been subjected to rates cuts with ten providers launching new bond rates which are on average 0.55 per cent lower than the products they are replacing.

Rumina Hassam, savings expert at uSwitch.com claims these reductions are unjustified.

"Savers haven't had an easy ride over the last 6 months, and these latest rate cuts must be yet another bitter pill to swallow. With the base rate remaining static, providers no longer have an excuse for cutting rates as they did during the period October 2008 to March 2009, yet still savers are being penalised with more savings shavings."

Warning savers to "keep a close eye" on providers who replace products with new deals that are paying less competitive rates in a bid to "encourage savers to tie in their cash for longer," Rumina Hassam added:

"Savers need to be aware that market leading rates across savings products are rarely around for long, with some only lasting a matter of weeks. Savers need to be agile in applying for the stellar rate products as soon as they appear - in this case good things don't come to those who wait."

© Fair Investment Company Ltd