This year, interest rates on savings accounts have steadily increased and we’ve seen some of the highest rates for 15 years.
The Bank of England’s decision to increase the base rate on 14 consecutive occasions heavily influenced these rates - that is until it decided to buck the trend and hold the base rate at 5.25% in September.
This was a surprise for many, as inflation was still high at 6.7% - a far cry from the goal of 2%.
Fast forward to today, and the Bank of England’s monetary committee met again to discuss the base rate. The decision was made to continue to hold the base rate at 5.25%.
We expected this decision as inflation still remains unchanged at 6.7%, but the Bank of England says it should fall to around 5% by the end of 2023. This is predicted due to the fact energy bills should come down and gas prices have reduced. Inflation should then continue to fall in 2024 and the 2% goal could be reached in the first half of 2025.
But what could this mean for savings rates now?
An illustration of how savings rates have changed in relation to the Bank of England base rate over the two past years. The average rates have been calculated by taking the rates from the whole of market at the time of the base rate change. Source: Defaqto and Bank of England data.
Well, since the decision in September, we have seen some changes to the savings market.
Top deals have been pulled by providers, including NS&I’s popular one-year fixed-rate bond in October. This savings account had a market-leading interest rate of 6.2% and it had been available to customers for just over a month.
Interest rates on fixed-rate accounts have also been dropping and we reported that by the middle of October interest rates on 68 products had decreased. In comparison, only 49 products in September experienced a drop in interest and a mere five products decreased in August.
The good news is that some providers are still offering fixed-rate accounts at above 6%, with Union Bank of India’s one-year fixed-rate account at 6.05%. This is perfect for savers who are happy to lock away their money for 12 months.
However, these top rates might not be around forever, so it’s always worth acting quickly if you see a deal that could work for your savings.
This is the same for easy access accounts, as last week the top interest rate was from Chorley Building Society at a competitive 5.30%. But, this deal was then pulled and it’s now unavailable for customers.
Currently, the top interest rate for an easy access account is Paragon’s double access account at 5.25%. The opening deposit is £1,000 and savers will need to be careful about withdrawals, as on the third withdrawal within the account year the rate decreases.
Overall, the savings market is fast moving, and the latest decision from the Bank of England only emphasises the importance of locking in good rates when you see them, as more providers could start to drop their rates.
That being said, the monthly average for savings accounts currently stands at 4.5%, so there are still plenty of deals available for savers that are looking to earn some extra money.
Remember, it’s always important to compare savings accounts and move money if it’s currently sitting in a savings account earning little interest.
As a trained journalist, Lucinda has spent the past 10 years writing and editing content for regional and national titles, including The Mirror, WalesOnline and Manchester Evening News. She is now a personal finance editor and specialises in savings, helping people to make confident financial decisions so they can save for what matters most.