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Savings rates peaked six months ago - but what does this mean for 2024?

Fixed-rate savings had interest rates above 6% last year, compared to today’s top rate of 5.30%.

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Savers still have the opportunity to make their money work harder this year

2023 was a wild ride for savers.

After years of feeble rates on savings accounts, there was suddenly an opportunity to earn some serious interest on our hard earned cash. 

Of course, the reason for this sudden uplift was partly due to the Bank of England increasing its bank rate to a huge 5.25% at the beginning of August. This was the 14th consecutive increase and the last time the bank rate stood at 5.25% was during the financial crisis in 2008. 

As we predicted, this cemented high rates across all savings accounts, so let’s look back at when the rates peaked. To do this, we’ve sourced data from Defaqto but excluded deals for existing customers, any area restrictions and children’s savings accounts. 

Top of the rates 

In July, a one-year fixed-rate account offered an interest rate of 6.20%, thanks to Vanquis' two-year savings bond and then NS&I’s one-year guaranteed income bond in August. This savings account stuck around until the beginning of October, but it was then pulled due to its popularity. It could also have been influenced by the Bank of England’s decision to freeze the base rate at 5.25% towards the end of September. 

The summer months in 2023 were also a good time for cash ISAs, with July and August featuring its peak rate of 5.90%. Royal Bank of Scotland and NatWest had a two-year fixed-rate cash ISA with this interest rate, which was a great opportunity for savers to lock in a high interest rate for one year, and earn interest tax-free. 

Notice savings accounts took a bit longer to offer its peak interest rate, with Marsden Building Society’s 150-day bonus notice saver offering 5.75% in September and October. It was a similar story with easy access accounts, as rates didn’t start to significantly increase until October with Paragon’s double access account at 5.25%. 

However, it’s important to look at these rates with the context of inflation. 

Inflation was still high in June at 7.9%, before falling slowly to 6.7% in September. This rate meant that even the peak interest rate on savings accounts wasn’t beating inflation - impacting the purchasing power of our savings. 

The good news is that, although interest rates might have peaked last year, savers can still be rewarded in 2024. 

Top interest rates on fixed-rate, easy access, notice and cash ISAs in 2023

An illustration of how savings rates changed in 2023 by looking at the top interest rate for each type of savings account. These rates exclude deals for existing customers, any area restrictions and children's savings accounts. Source: Defaqto and Money.co.uk.

A new dawn for savings

So, let’s look at the rates today. 

Yes, compared to last year the interest rates have definitely fallen, but top rates are still beating inflation - so it’s still worth switching accounts if your current interest rate is low. 

At the time of writing, the top interest rate for a fixed-rate is 5.30% with Investec’s one-year fixed-rate account. Metro Bank’s instant access account is very attractive at 5.22%, only 0.03 percentage points below the peak last year. 

Notice savings accounts also remain competitive with United Trust Bank’s 200-day notice account at 5.58%. Finally, the top interest rate for a cash ISA stands at 5.25% with the Teachers Building Society’s 180-day notice cash ISA. 

Time to act

All of the above savings accounts have rates above inflation, so savvy savers still have the opportunity to make their money work harder this year. 

However, by looking at the rates from last year it’s clear that the top rates won’t be around forever. So, if you are looking to switch savings accounts now is the time, as a provider can pull a top rate whenever they wish - especially as the base rate could change again at the next Bank of England meeting on February 1, 2024.

Mark this in your calendar as if you want to wait for this decision, you’ll need to act as soon as the base rate is announced.

Maximise the value of your savings by hunting down the best rates available

About Lucinda O'Brien

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.

View Lucinda O'Brien's full biography here or visit the money.co.uk press centre for our latest news.