Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:
“Interest rates on savings accounts fell to record lows last year, so seeing such vast improvements across the top rate tables since then is reassuring. However, inflation is dampening progress as not one standard savings account can outpace its current level. One area of the savings market to see notable volatility is one-year fixed rate bonds, and savers will find the top rate deal (2.75%) pays more than double that of the top deal a year ago (1.10%). Fixed bonds and fixed ISAs overall are seeing improvements across all terms, and this competition has been predominantly fuelled by challenger banks jostling for a prominent position to entice savers’ deposits.
“Savers will find they can earn three times the return on the top easy access account right now (1.60%), compared to the best deal a year ago (0.50%), which is great news for those looking for a flexible pot to store their hard-earned cash. While this is positive, the stark reality is that inflation is eroding the real spending power of consumers’ cash and is expected to remain at a high level for some time. Indeed, the Bank of England predicts inflation to be around 6.6% during Q2 2023, so while this is less than the current level, it’s still considerably higher than the 2% target.
“As interest rates continue to rise, it’s uncertain whether savers would be content to lock their cash away for more than a year, particularly if they feel more improvements could surface or if they need the reassurance of dipping into their savings pot. Spreading cash across both easy access accounts and short-term fixed to secure a guaranteed return could be a wise move to get the best of both worlds. However, savers who are comparing easy access accounts must be mindful that not all of them allow unlimited withdrawals and, in some cases, heavy bonuses can apply for just 12 months – so it’s wise to make a note to switch before they expire.
“The five back-to-back Bank of England base rate rises may not be passed on in full to savings customers, so it’s vital they compare deals and switch if they are not being rewarded for their loyalty. As it stands, savers will find some of the best rates from the more unfamiliar brands, and so long as they have the same protections in place as a well-known bank, there is little reason to overlook them.”
*Data note: Please note that these savings product numbers only include deals that are available to UK residents (easy access, notice, fixed rate bonds, variable or fixed ISAs) and exclude regular savers and children’s savers (this figure does not count each interest payment option for each account), based on a £10,000 deposit. Higher rates may be available for other levels of deposit.
Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:
“Interest rates on savings accounts fell to record lows last year, so seeing such vast improvements across the top rate tables since then is reassuring. However, inflation is dampening progress as not one standard savings account can outpace its current level. One area of the savings market to see notable volatility is one-year fixed rate bonds, and savers will find the top rate deal (2.75%) pays more than double that of the top deal a year ago (1.10%). Fixed bonds and fixed ISAs overall are seeing improvements across all terms, and this competition has been predominantly fuelled by challenger banks jostling for a prominent position to entice savers’ deposits.
“Savers will find they can earn three times the return on the top easy access account right now (1.60%), compared to the best deal a year ago (0.50%), which is great news for those looking for a flexible pot to store their hard-earned cash. While this is positive, the stark reality is that inflation is eroding the real spending power of consumers’ cash and is expected to remain at a high level for some time. Indeed, the Bank of England predicts inflation to be around 6.6% during Q2 2023, so while this is less than the current level, it’s still considerably higher than the 2% target.
“As interest rates continue to rise, it’s uncertain whether savers would be content to lock their cash away for more than a year, particularly if they feel more improvements could surface or if they need the reassurance of dipping into their savings pot. Spreading cash across both easy access accounts and short-term fixed to secure a guaranteed return could be a wise move to get the best of both worlds. However, savers who are comparing easy access accounts must be mindful that not all of them allow unlimited withdrawals and, in some cases, heavy bonuses can apply for just 12 months – so it’s wise to make a note to switch before they expire.
“The five back-to-back Bank of England base rate rises may not be passed on in full to savings customers, so it’s vital they compare deals and switch if they are not being rewarded for their loyalty. As it stands, savers will find some of the best rates from the more unfamiliar brands, and so long as they have the same protections in place as a well-known bank, there is little reason to overlook them.”
*Data note: Please note that these savings product numbers only include deals that are available to UK residents (easy access, notice, fixed rate bonds, variable or fixed ISAs) and exclude regular savers and children’s savers (this figure does not count each interest payment option for each account), based on a £10,000 deposit. Higher rates may be available for other levels of deposit.
