Savers may have to act fast to grab the top savings rates as many of the best deals are being withdrawn from the market.
The returns on savings rates hit “dizzy heights” of over 6% during 2023 “after decades in the doldrums”, said MoneyWeek, but top deals are being removed from the market as inflation slows and the Bank of England (BoE) base rate remains frozen.
It’s been a “good year” for savers, said This Is Money, as they have seen rates rise to a 15-year high in response to interest rate hikes from the BoE throughout much of 2023.
But the days of 6.2% one-year rates are “well and truly over”, added the financial website, since interest rates may have peaked and have been held at 5.25% for three consecutive monetary policy committee meetings.
The state of the savings market
The financial markets are now accepting that the base rate has “probably reached its peak”, said SavingsChampion, so we may not see many more increases to savings rates.
Moneyfacts has recorded the “biggest month-on-month rate cuts” in over a decade.
The average easy-access rate has fallen for the first time since September 2021 to 3.17%, while the average one-year fixed bond had its largest monthly fall since February 2009, dropping from 5.36% to 5.13%.
This may be “disheartening news” for investors, said Moneyfacts’s Rachel Springall, but it is important to shake off any apathy and “act quickly to take advantage of the latest top rates”.
Where are the best savings rates?
Metro Bank currently has the highest-paying easy-access account at 5.22%, according to MoneyWeek, and Al Rayan Bank offers the top fixed-deal rate at 5.7%. That beats the current inflation rate of 3.9%.
Go for easy access if you need “instant access” to your cash, said MoneySavingExpert, or you can get higher returns if you are willing to “lock your cash away” for longer.
Easy access rates have remained “broadly stable”, said the Daily Telegraph.
But it may be worth opting for a longer-term rate now before returns fall further.
Many longer-term savings bonds may be paying less than short-term alternatives, said SavingsChampion co-founder Anna Bowes in the i newspaper, but that “makes it clear that the market expects the base rate to fall” so you are “likely to get a better deal overall” if you fix for a long period.
Look beyond fixed-rate savings accounts
Fixed rates are just one type of savings product to consider.
Regular saver accounts are currently offering “some of the best returns” on the market, said Forbes Advisor.
These products let you save a “certain amount” each month, explained The Times Money Mentor, and savers typically earn a “higher interest rate than…with a normal savings account”.
Currently, regular saver accounts have rates of up to 8% but they may be available only to existing current account customers, and there may be limits on how much you can save and when you can make withdrawals, added the financial website.
Should you invest instead?
Finding the “best possible rate” is a priority for any saver, said Unbiased, but if inflation is higher than the amount of interest you receive, the “real value of your money will reduce”.
If you are willing to “tuck your money” away for at least five years, it may be worth considering investing in the stock market through shares or funds instead, giving your money a “better chance” to grow but this will usually depend on “how long you wish to save or invest for”.
However, investment always comes with a level of risk, and investors may get back less than they originally put in, so this must be carefully considered.
The top savings deals are disappearing from the market as interest rates remain frozen
