Why high street banks may not be the best place for your regular savings
Several banks have announced rate reductions on their savings accounts since 8 May when the Bank of England cut the base rate to 4.25%.
HSBC, for example, will cut the rate on its flexible saver account from 1.35% to 1.30% AER on 21 July, while Barclays will cut the rate on its everyday saver from 1.16% to 1.11% AER on 4 August.
It's not only high-street providers that have cut rates. At the beginning of the year, before the Bank of England made its first rate cut in February, the top unrestricted easy access account available was with Gatehouse Bank and was paying 4.75%.
Today, after two base rate cuts amounting to 0.5%, this account is now paying 4.15% - so has fallen at the same rate.
"The difference, of course, is that the Gatehouse account is still fairly competitive - paying just a little less than base rate - and importantly more than CPI inflation," says Bowes.
So, although high street banks are cutting rates by a smaller amount, they are still very uncompetitive.
For those who are willing to shop around, there are still good rates to be found, with the top easy access accounts changing very little since January.
"At the beginning of the year, the average of the top five easy access accounts was 4.79% - at the time of writing it's 4.66% with the top rate from Chip paying 4.77% AER," Bowes adds.
"So, for those with cash in their high street bank's easy access account, don't wait for the rates to be cut - you are likely to already be getting a raw deal, so switch today to get your cash working harder."
And for a £50,000 balance...
Taking a wider look at the savings market, we saw the average rate for one-year and two-year bonds fall slightly.
But those willing to lock their cash away for three or five years could benefit more as the average rates on these accounts increased.
"This now means that the rates for all terms are very similar, which could mean that locking in for the longer term is more appealing to those people who were put off by the fact that the rates were much lower in the past," Bowes says.
"Of course, there is a possibility that with inflation expected to increase again, certainly in the short term, further rate cuts may not happen immediately, but the trajectory is still downwards.
"Therefore, if you're locking some of your cash up for the long-term you might be pleased you have done so in one or two years' time when your bond comes up from maturity, if the rates available then are lower."
Here's a look at the best rates available...
We saw similar movement in fixed-rate ISAs, which have been very resistant to the recent base rate cut.
The top one-year rate is slightly higher than it was a week ago, as is the five-year rate.
"Remember, although the ISA rates look like they're lower than that of the equivalent fixed-term bonds, after tax is deducted from the bond often a cash ISA will provide a better return to those people who are paying tax on their savings now," Bowes points out.
"Of course, it's also important to shop around to earn as much interest as you can."
Here's a look at the best rates available...
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