Instant access savings rates fall to just 3.3%

The average interest rate on an instant access savings account now stands at just 3.3 per cent – compared with 3.76 per cent in January.

The fall in rates comes despite banks and building societies turning to depositors for funds amid the liquidity squeeze.

Analysis by MoneyExpert.com reveals the number of accounts over five per cent – the Bank of England base rate – now stands at 145, compared to 270 at the beginning of the year.

Furthermore, of the 1,501 instant access savings products on the market, 299 offer less than two per cent.

Sean Gardner, director of MoneyExpert, said: "Having instant access to your cash is a genuine benefit but for many savers it means you have to watch the interest rate set by your bank carefully.

“With around one in eight instant access savings accounts paying under two per cent interest, if you don’t keep an eye out the banks will take full advantage.

The fall in savings rates comes as banks try to goad savers in long-term savings and bonds.

Mr Gardner said: “The drop in instant access savings rates reflects banks’ efforts to encourage people to save for the long term.

"They want to know they have money to play with and can’t afford to offer as good deals to attract short-term savings that can be withdrawn without penalty at a moment’s notice.

"This explains why there are still some great deals on offer in regular savings and fixed term bonds. Anyone who has some cash set aside could benefit significantly."