Savers are enjoying the widest choice of accounts on record – but returns are quietly sliding, new figures show.
The number of savings deals has surged to 2,394, including ISAs, which is the highest level on its records and the biggest monthly jump since June 2023, according to Moneyfacts.
Strip out ISAs and there are 1,726 live accounts – the highest number of non-ISA products in more than 16 years. Cash ISA choice has risen for a third consecutive month to 668 deals, also a record.
Despite the surge in choice, the average rates offered to savers are heading in the opposite direction. The average easy access rate has fallen to 2.41%, its lowest since July 2023.
One-year fixed bonds now pay 3.81% on average – the lowest since April 2023 – while the overall Moneyfacts Average Savings Rate has dropped to 3.31%, down from 3.69% a year ago.
Caitlyn Eastell, Personal Finance Analyst at Moneyfacts, said: “Savers now have more choice than ever before as the number of products and providers reach record-highs. Lesser-known banks help the market grow and can be a source of innovation as they typically need to compete harder for savers’ hard-earned cash.
“However, many average rates continue to fall across the board. Variable ISAs and non-ISAs are now at their lowest levels in almost three years, while most fixed rates are at their lowest in almost three years, except for long-term non-ISAs which are at their lowest in four.
“It would not be surprising if the fading rate environment leaves savers disheartened, but it’s vital that they do not give in to apathy as they can still get over 4% on the most competitive accounts.”
She added that ISA bonuses are at their highest level in 16 years and warned that with income tax thresholds frozen until 2031, more savers could drift into the higher-rate band – cutting their Personal Savings Allowance to £500.
At the current average rate of 3.31%, a basic-rate taxpayer could hold roughly £30,200 in a taxable savings account before paying tax on the interest. For higher-rate taxpayers, the figure is around £15,100.
Financial advisers say the headline surge in choice masks a tougher reality. Rob Mansfield, Independent Financial Advisor at Rootes Wealth Management, told Newspage: “With interest rates falling back to July 2023 levels but record numbers of accounts available, it suggests banks and building societies are favouring gimmicky features rather than offering simple accounts with decent rates of interest.
“You have to keep on your toes to secure the best rates or risk inflation nibbling away at your hard earned savings.”
Scott Gallacher, Director at Rowley Turton, warned complacency is costly: “Billions still sit in older accounts paying around 1%, which in real terms means many are going backwards. On £20,000 of savings, sticking at 1% instead of 4% costs around £600 a year – that’s the price of doing nothing.”
Philly Ponniah, Chartered Wealth Manager at Philly Financial, said: “Savers may have more choice than ever, but they need to tread carefully as rates continue to fall. Averages are sliding quickly, easy access is down at 2.41% and one year fixes have dropped to 3.81%. That tells you banks expect rates to soften further. If you are waiting for rates to bounce back, you may be waiting a while.”
She added: “It is also worth remembering that cash is for short-term goals and emergency funds. Over time, inflation quietly eats away at the real value of money sitting in savings. For longer term wealth building, a stocks and shares ISA can give your money a better chance to grow above inflation.”