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Savings accounts squeezed on interest rates

One in ten of variable rate savings accounts have seen their interest rates cut over the past six months.

The news comes from a study carried out by the finance information organisation Moneyfacts.

Just 3.5 per cent of variable rate savings accounts have registered an increase in returns since May, the research also showed.

As a result, almost half (49 per cent) of variable savings accounts are delivering rates of 0.5 per cent or less. Nearly one in four are mustering rates of 0.1 per cent or less.

Recent data from the Bank of England indicated that the average interest rate offered by instant access savings accounts is 0.17 per cent.

Rules introduced this month mean that banks and building societies must provide savers with a minimum of two months’ notice of any reduction in rates, except in those cases where the account tracks moves in the base rate.

Michelle Slade of Moneyfacts said: “Savers are already experiencing some of the lowest rates ever and this will be another bitter blow to take. They will be asking how providers can justify cutting rates further, when the base rate has remained on hold.

“Savers need to ensure they review the rate they are receiving regularly and switch accounts if it is no longer competitive.”