Savers urged to grab top rates while they can
Falling interest rates mean that savers need to get their skates on if they want to take advantage of current competitive returns.
The Bank of England’s Monetary Policy Committee voted by 7-2 earlier this month to cut the base rate from 4.75% to 4.50%, and savings providers have already started trimming rates in response to the rate reduction.
Here, we highlight some of the top savings rates that are currently available, and why you shouldn’t hang around if you spot an account you like.
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Cash ISAs
There are rumours circulating that the Chancellor Rachel Reeves might be considering scrapping Cash ISAs to encourage savers to put money into investments instead, but as yet nothing has been officially announced. Even if this does happen, it’s very unlikely that it would affect existing Cash ISAs. These accounts are hugely popular with savers as returns are free from both income tax and capital gains tax (CGT).
Mark Hicks, Head of Active Savings at Hargreaves Lansdown, said: “The debate has been driven entirely by speculation, but it has highlighted the draw of current Cash ISA rates, which remain incredibly attractive. Getting in before March could end up paying off too, if Cash ISA rates ease off in the coming weeks. Since the Bank of England cut last week we’ve seen fixed rates fall already by 0.1%”
At the time of writing, best buy easy access ISAs include Plum’s Cash ISA paying 4.82% AER, Tembo’s Cash ISA paying 4.8%, and Monument Bank’s Easy Access Cash ISA paying 4.76%. These accounts can be opened with a minimum deposit of £100, £1 and £10,000 respectively.
Easy access savings
If you’ve already used this year’s £20,000 annual ISA allowance, and you need your savings to be readily available, you may be looking for a competitive easy access savings account.
At the start of last week, Moneyfacts’ data revealed the average rate offered by easy access accounts from a selection of the UK’s biggest banks was a lowly 1.66%. By comparison, Coventry Building Society’s 4 Access Saver account pays 4.85% and can be opened with as little as £1. You can make up to four penalty-free withdrawals from this account each year.
A spokesman for Moneyfacts said: “Savers who rely on the flexibility of an easy access account should closely monitor the market in the coming weeks and may want to consider switching if more competitive rates are available - especially if the returns they’re currently receiving dip below inflation.
“This is particularly important for those not seeing their loyalty repaid by high street brands, who may be missing out on hundreds of pounds of interest each year.”
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Fixed rate savings bonds
If you're worried about falling returns, you may want to consider locking your money away in a fixed rate savings bond.
My Community Bank currently offers one of the best one-year fixed rates with its 1 Year Fixed Rate Bond paying 4.67% AER after opening with a £1,000 minimum deposit. If you want to tie up your savings for longer, JN Bank’s 5 Year Fixed Rate Savings account pays 4.6% AER on a minimum £100 deposit.
Remember that this type of account will only work for you if you can afford to tie up your savings for the term of the account as if you need to take your money out earlier, you'll usually face a penalty, typically loss of interest.