Double-whammy for savers as base rate is cut again to 0.1%

Savers have been handed more dire news as the Bank of England announced its second emergency cut in eight days, slashing base rate to its lowest ever level of 0.1 per cent.

The move was part of a package of rescue measures to fight the economic impact of coronavirus, but will deliver a double whammy to savers – many of whom are still waiting to see what the damage to their savings rate is from last week’s 0.5 per cent cut.

The base rate cut and a cheap funding pot alongside it likely spell doom for any savers hoping for a decent return on their money in the foreseeable future, with banks facing even less incentive to pay savers for their deposits. 

The central bank also announced it would pump another £200billion into buying Government and corporate bonds, and enlarge a scheme allowing small businesses to access cheap money.

The Bank said in a statement on its website: ‘The spread of coronavirus and the measures being taken to contain it will result in an economic shock that could be sharp and large, but should be temporary.’

James Blower, industry expert and founder of The Savings Guru, said savers were living in ‘unprecedented’ times, having last week warned they were ‘in for a rough few months’.

The news is doubly dire given that many banks have yet to pass last week’s base rate cut of half a percentage point onto savers, meaning today’s cut of 0.15 percentage points could hand savers a double blow.

The average rate of an easy-access account, which many savers will be looking to as they keep their cash on hand amid the coronavirus pandemic, had fallen just 0.02 percentage points since the start of March, according to Savings Champion.

But this is likely because returns on large numbers of savings accounts are already pitiful. Top accounts will most likely see major chops to their headline rates.

Two days ago savings bank Ford Money slashed some of its savings rates by a whopping 0.42 percentage points, having previously paid some of the best rates around. Those deals could now fall even further, and though rates have held up fairly well since last week, they could soon buckle.

But it is also possible that savings rates are slightly supported, as there has been little appetite yet among lenders to offer cheaper fixed-rate mortgage deals on the back of last Wednesday’s base rate cut.

Andrew Montlake, managing director of mortgage broker Coreco, called the latest base rate cut ‘symbolic’, and warned it was ‘unlikely to translate into cheaper rates across the board.’

Adrian Lowcock, head of personal investing at DIY investment platform Willis Owen, said: ‘This is more bad news for savers as cash savings rates are already so low. It is more important than ever that they make sure their cash earns the best rates possible by shopping around.’

Blower added: ‘In the past week, the savings market has lost best buy rates from Bank of London & Middle East, Ford Money, Habib, Ikano and United Trust Bank. 

‘It’s hard not to see that trend continuing and a further fall bank in rates to come.

‘There are few glimmers of hope but those looking for signs of optimism will have been buoyed by Smartsave Bank bucking the trend and launching a best buy one-year fixed-rate bond.

‘I’m also in the school of thought that rates are at such a point that there’s limited room to fall much further. While I expect some pull back from these levels, I’m not expecting drops in line with those witnessed in the FTSE in recent weeks.

‘Finally, despite the influx of new entrants there’s still considerable interest from prospective new banks and I think the market has a way to go. If we can get past coronavirus in the next few months, there’s hope for savers later in the year.’