Savers may want to get their skates on to benefit from the top-paying accounts, as providers are cutting rates and pulling deals from the shelves.
If you’re lucky enough to have spare cash, you can benefit from some of the highest savings rates since 2008, following a series of interest rate hikes. Savers can receive around 5.18% interest on some fixed rate bonds, but deals are starting to disappear as rates are expected to fall over the long term.
National Savings and Investments (NS&I) has cut the rate on its three-year fixed Green Savings Bonds to 2.95% from 3.95%. Read more in our article Fixed rate savings bonds explained.
Both fixed and variable savings rates crept upwards last year, following 14 hikes in the Bank of England base rate since December 2021. Interest rates currently stand at 5.25% and have remained at this rate since August 2023. However, inflation fell to 3.2% in March, down from 3.4% in February, making it easier for savers to find returns that keep pace with living costs.
The recent interest rate increases have mostly been factored into the top savings rates, with the highest rates for easy access accounts reaching around 5.06% , and rates on the best one-year fixed-rate bond sitting at 5.18%. The increase in rates has also saw NS&I hike the prize rate on Premium Bonds from to 4.65%, although this rate has now fallen to 4.40%. Read more in our article Are Premium Bonds better than savings accounts?
With interest rates currently higher than inflation, savers are in a stronger position. So if they’re accessing a savings account which pays 5.05%, for example, they will still be earning 1.85% in real terms at the current rate of inflation. On £10,000 of savings, that is an earning of £185 a year in real terms.
What are the top savings accounts?
With the cost of living soaring, it’s more important than ever to ensure you’re getting as much in interest as possible from your cash savings.
Easy-access savings accounts usually enable you to take your money out whenever you want, without any loss of interest. It’s generally considered wise to have three to six months’ worth of essential spending in an easily accessible account to cover any unexpected costs, such as car repairs or a boiler breakdown.
For example, Post Office Money is paying 5.06% on a minimum deposit of £1 on its Online Saver Issue 72.
Elsewhere, Cynergy Bank is paying 5.01% on a minimum deposit of £1 on its Online Easy Access Account (Issue 71).
Find out more about the best accounts at present in our regularly updated article Best easy access savings accounts.
You can benefit from higher rates in Cash ISAs for tax-free interest, if you aren’t using your £20,000 annual allowance to invest elsewhere. Read more in our article Best cash ISA rates – which cash ISAs pay the most interest?
Fixed-rate bonds usually pay more than easy access accounts, but you can’t withdraw money from this type of savings account before the term ends without penalty. Beehive Money is currently paying 5.18% on its One Year Bond Issue 10 on a minimum deposit of £500. If you need the money, you can close the account, but this will mean some charges, such as loss of interest. However, you will have the security that the interest rate will remain the same until the end of the account term. Find more information about these accounts and the top rates in our article Fixed rate savings bonds explained.
What should savers do?
See if you can get a better return on your savings elsewhere. Check savings websites such as SavingsChampion or price comparison sites such as Moneyfacts, or GoCompare to see if you can find a higher interest rate to move to.
Alternatively, if you have plenty of cash savings set aside that you can access at any time, you may want to consider investing for long term gains. After all, savings rates are not high enough to keep up with rising living costs. Meanwhile, stock markets have fallen substantially this year, which could make it a good time to be invested to benefit for the long term. Find out more in our article Investing – the basics and Savings accounts or shares – which is the best option?
Rest Less Money is on Instagram. Check out our account and give us a follow @rest_less_uk_money for all the latest Money News, updated daily.