Savings account interest rates could be at peak of 6% with customers warned to act fast for best deals
Savers are being urged to act fast to take advantage of the best rates as providers are set to pull their top deals from the market after the Bank of England rate decision.
Savings rates could be at a peak of 6 per cent following the Bank’s announcement that it will pause the base rate at 5.25 per cent.
It is the first time since December 2021 that the Bank has decided not to change the rate, and follows the surprise drop in the rate of inflation to 6.7 per cent.
Experts have told i savings accounts are likely to have reached their peak at 6 per cent and they expect rates to drop in the coming days.
The best available one-year fixed deal was 6.20 per cent, the best available two-year fixed deal was 6.05 per cent and the best easy-access savings account offered a rate of 5.05 per cent on Thursday, after the Bank’s decision.
Anna Bowes, co-founder of Savings Champion, which monitors and advises on the UK savings market, said she is was worried competition among providers could wane, as a result.
“When the base rate has been increased, we’ve seen providers increasing their rates, although not by base rate,” Ms Bowes said. “Now the base rate has paused, I am worried that we actually might see competition waning a little bit.
“It’s too early to tell but it’s possible – and certainly the fixed-term bonds – competition had already eased a bit until NS&I launched that one-year bond paying 6.2. But prior to that, actually, a lot of rate rises had stalled.”
Ms Bowes said that providers are already pulling their best deals, meaning savers will have to act fast if they want to take advantage of what is on offer.
“We could actually see the leading rates being withdrawn from the shorter-term fixed-rate bonds. So I think it makes it more urgent for people to get a move on really if they’ve been procrastinating in particular because it’s all too possible.”
Ms Bowes said now is probably a good time for people looking to tie up money in savings accounts to do so, although she added that there might be another base rate rise.
“It depends what happens at the next inflation report. Because core inflation had dropped as well as the headline rate at CPI. So that’s all a good indication, but if it was a blip, and if we see if we don’t see a continued improvement, then the Bank of England may be forced to move again.”
Personal finance expert Andrew Hagger said savings rates are probably as high as they’re going to go.
Mr Hagger said: “There are some really good deals out there at the moment. You can still get above 6 per cent at the moment, but I think if you looked again in six weeks, two months’ time, the 6 per cent rates would be gone. So if you want to get the very best, I would act promptly.
“There’s a one-year [fixed-rate] bond from National Savings & Investments at 6.2 per cent, and that’s a real stand-out rate. I’m not sure how long that’s going to be there.
“I think we will start to see rates come down. It’s not going to be an immediate fall off a cliff, but I think they’ll gradually drift lower.”
Money saving expert Martin Lewis has warned that providers could withdraw top rates as soon as later today.
Mr Lewis tweeted: “URGENT SAVERS WARNING (pls share). The Bank of England minutes ago voted to maintain interest rates at 5.25% – not increase as many predicted.
“It’s therefore possible fixed rate savings may shave down their rates at speed (as they’re based on longer-term predictions of interest rates). If so, and you were looking to lock-in a fix, you’ll want to open a top fix this minute as the rates could drop even by later today, certainly if it does happen by later this week.”
He added that savers can open a fixed-rate account immediately but hold on and see what happens before depositing money into it as customers often have between seven and 14 days to do this.
Best savings account available
Best buys for one-year fixed deals
National Savings & Investments – 6.20%
Union Bank of India (UK) Ltd – 6.11%
Ahli United Bank (UK) plc – 6.10%
SmartSave – 6.06%
Best two-year fixed deals
Ford Money – 6.05%
Ikano Bank – 6.05%
Union Bank of India (UK) Ltd – 6.05%
GB Bank – 6.01%
OakNorth Bank – 6.00%
Best easy-access accounts
Paragon Bank – 5.05%
Shawbrook Bank – 5.02%
Kent Reliance – 5.01%
Gatehouse Bank – 5%
Yorkshire Building Society – 5%
Aside from these deals, a new market-leading savings deal of 8 per cent launched on Wednesday, the best deal in a decade.
Nationwide is offering the highest rate since February 2013 and is also giving customers who switch to their Flex Regular Saver account a bonus of £200.
Last time Nationwide offered a £200 switching deal they gained nearly 147,000 switchers, the highest-ever recorded by the Current Account Switching Service.
Read more on this story here.
