United Kingdom

Best savings rates: Marcus launches one-year fixed-rate paying just 1%

Goldman Sachs-backed Marcus Bank has brought back its one-year fixed-rate deal, but the account now pays a lower rate than its easy-access deal.

The bank launched a 12-month bond paying 1.45 per cent towards the end of March, expanding its offering beyond its sole easy-access account which at the time was paying 1.3 per cent.

It pulled the account from sale on 7 May and has now relaunched it a month later.

Goldman Sachs-backed Marcus has again offered savers an alternative to its easy-access account, but its one-year fix now pays less

But in a sign of how savings rates continue to fall as banks cut rates in response to the coronavirus, the new one-year fixed-rate now pays 1 per cent and its easy-access account 1.05 per cent.

The fact Goldman Sachs - which has taken in more £17billion from savers since it launched a 1.5 per cent easy-access account in September 2018 - is currently paying savers less to lock their money away for longer may raise fears it is planning to cut its easy-access rate once again to rebalance its offer.

Since the Bank of England cut its base rate to a historic low of 0.1 per cent in mid-March, the rate on the account has fallen from 1.3 per cent to 1.05 per cent, a difference of £25 interest on £10,000 of savings.

Marcus currently pays 1.05 per cent alongside RCI Bank, but the number of easy-access deals paying more than 1 per cent has thinned out after a raft of recent cuts.

Family Building Society, Virgin Money and Kent Reliance on Thursday cut their easy-access rates from 1.06 per cent, 1.01 per cent and 1 per cent to 0.61 per cent, 0.75 per cent and 0.7 per cent respectively. 

It follows Aldermore Bank and Shawbrook Bank cutting easy-access rates over the Bank Holiday weekend a week ago from 1 per cent to 0.8 per cent and 0.75 per cent, respectively.

Those five cuts mean there are just five accounts paying 1 per cent or more, with Goldman Sachs offering two of them in the form of Marcus and Saga, whose savings accounts are provided by the Wall Street giant.

The fourth of those is Family Building Society's market tracker saver, an account which tracks the Bank of England base rate and will be heavily slashed next month.

Marcus removed its one-year fixed-rate paying 1.45% from sale on 7 May. It has now brought it back a month later, at a much lower rate

The last account paying 1 per cent is offered by Treasury-backed National Savings & Investments.

James Blower, industry expert and founder of The Savings Guru, said: 'The move by Marcus certainly tells a story about where their pricing is heading by the fact that their one-year rate is lower than their easy-access rate.

Virgin, RCI and Marcus have been pretty much the front three in easy access for some time now. Virgin has been first mover in that group and, when it’s moved, the others have followed quickly. 

James Blower, The Savings Guru 

'The presence of NS&I will mean the 1 per cent headline rate will hold in easy-access and that it may be enough for Marcus and RCI to stay at their current levels. 

'I think it's more likely that they will follow Virgin's lead and cut, though I suspect we will be looking at an adjustment downwards of 0.05 - 0.1 percentage points from them, rather than the 0.26 percentage points that Virgin went for.'

Before savings rates really began to freefall, households stashed an extra £16.5billion in easy-access accounts between January and March this year, according to trade body UK Finance.

The Bank of England has also found households have been saving more since the coronavirus hit and Britain went into lockdown, with households stashing away an extra £16.2billion in April, more than three times the average put away each month.

While savings experts fear easy-access rates could fall below 1 per cent, the relaunching of Marcus' one-year fixed-rate at 1 per cent may prove an accurate prediction of where those rates end up.

How savings rates have collapsed in the face of coronavirus
Date  Average easy-access rate Average one-year fixed-rate 
11 March 2020 0.6%1.15% 
13 April 2020 0.5% 1.05% 
1 June 2020 0.3% 0.92% 
Source: Moneyfacts.co.uk 

When it launched at the end of March, the 1.45 per cent rate was not a best buy, with short-term fixed-rate deals paying 1.55 per cent at the time. 

However, they have fallen drastically since then, with the best one-year fixed-rate paying 1.25 per cent now.

Over the Bank Holiday the last remaining accounts paying more than 1.3 per cent were slashed, while Atom Bank cut its one-year fix paying 1.3 per cent to 1.15 per cent this week.

The size of Marcus means that if it sticks around it may cushion one-year fixed-rates from falling much further, but it may be unlikely to stop best buy rates from sliding, unless the economy begins to recover and banks need to raise more money from savers again.

How savers kept cash on hand as the coronavirus struck
Month  Amount held in easy-access accounts Amount held in notice and fixed-rate accounts 
January 2020 £670.6bn£193.9bn 
February 2020 £676.5bn£193.1bn 
March 2020 £687.1bn £193.06bn 
Source: UK Finance 

James adds: 'We've seen Atom and Hodge Bank move and I expect Ikano to follow and headline one-year rates to drop in to the range of 1.20 - 1.25 per cent with the following pack in the range of 1.05 - 1.15 per cent. 

'I think Marcus are positioning themselves to be just outside the top 10 pricing.'

The average one-year fixed-rate bond fell from 1.15 per cent to 0.92 per cent between 11 March, the day the Bank of England cut its base rate from 0.75 per cent to 0.25 per cent, and the start of June, according to Moneyfacts.

The number of available short-term fixed-rate deals has fallen from 104 to 81 over the same period.

Moneyfacts' Rachel Springall said: 'It's clear to see that savers can feel the force of cuts three months on from a significant event, so if savers haven't already, they are more likely than not to see cuts in the weeks to come. 

'This expectation should jolt savers in action, so we could well see a summer of switching.

'The average return on easy access accounts, which are a firm favourite for savers, has fallen to a record low of 0.30 per cent and, as it stands, the average rate offered on one-year fixed bonds is heading to a record low as well. 

'This means savers putting money away in the short-term will need to act quickly to take advantage of the most lucrative rates.'

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