Best savings accounts you need to apply for now as experts say it’s ‘vital to act fast’
SAVERS are taking a hit as major banks and building societies slash interest rates.
Those who want to secure returns of up to 5% on their deposits will need to act swiftly.
The average interest rates offered on both fixed term and easy access deposits fell across the board for the first time since January last week.
And this trend is continuing.
Experts have warned that it’s “vital for savers to act fast to grab a top rate.”
Rachel Springall, finance expert at Moneyfactscompare.co.uk said: “The savings market felt a wave of fixed rate cuts since the beginning of last week, but there are also some new market-leading deals surfacing.
“There have been a few competitive deals withdrawn entirely from the market, which makes it vital for savers to act fast to grab a top rate.”
This change comes despite the Bank of England‘s voting to keep the base rate at 5%.
Savings rates usually rise and fall with the Bank of England‘s base rate.
This was cut for the first time in four years from 5.25% to 5% in August.
However, markets are pricing in one further rate cut in 2024.
If forecasts are correct, the base rate could fall to 4.75% by the end of 2024.
That’s bad news for savers, whose rates typically fall when the Bank’s rate is cut.
Rachel Springall added: “Despite no change from the Bank of England base rate last week, savers should still make every effort to review their accounts and switch if they are getting a raw deal as savings rates have been on the downward trend.”
However, a host of savings accounts allow you to lock your money away on the promise you’re paid a fixed interest rate for a defined period.
Fixed rate bonds can be a useful bet to help ride out future cuts to the base rate.
If you can’t afford to lock away your cash, there are still other account options available offering competitive rates.
SAVING ACCOUNT TYPES
THERE are four types of savings accounts fixed, notice, easy access, and regular savers.
Separately, there are ISAs or individual savings accounts which allow individuals to save up to £20,000 a year tax-free.
But we’ve rounded up the main types of conventional savings accounts below.
FIXED-RATE
A fixed-rate savings account or fixed-rate bond offers some of the highest interest rates but comes at the cost of being unable to withdraw your cash within the agreed term.
This means that your money is locked in, so even if interest rates increase you are unable to move your money and switch to a better account.
Some providers give the option to withdraw, but it comes with a hefty fee.
NOTICE
Notice accounts offer slightly lower rates in exchange for more flexibility when accessing your cash.
These accounts don’t lock your cash away for as long as a typical fixed bond account.
You’ll need to give advance notice to your bank – up to 180 days in some cases – before you can make a withdrawal or you’ll lose the interest.
EASY-ACCESS
An easy-access account does what it says on the tin and usually allows unlimited cash withdrawals.
These accounts tend to offer lower returns, but they are a good option if you want the freedom to move your money without being charged a penalty fee.
REGULAR SAVER
These accounts pay some of the best returns as long as you pay in a set amount each month.
You’ll usually need to hold a current account with providers to access the best rates.
However, if you have a lot of money to save, these accounts often come with monthly deposit limits.
We’ve outlined the best savings rates by account type below to help you maximise your returns.
What’s on offer?
The best fixed rate currently offered is Mizrahi Tefahot Bank’s one year fixed bond, which pays 5% (but requires a minimum investment of £1,000).
Depositing £5,000 in this account would yield £250 in interest over 12 months.
Union Bank of India’s one year fixed bond offers 4.95% on savings above £1,000.
The best notice accounts are actually offering slightly higher rates than the best fixed-term bonds.
These also come with more flexibility when accessing your cash.
Bank of London and The Middle East’s 90 day notice account offers savers 5.15% back with a minimum £10,000 deposit, for example.
OakNorth Bank’s 95 day notice account offers 5.12% back to those with less money to save – and it only requires a minimum deposit of £1.
If you’re looking for a savings account without withdrawal limitations, then you’ll want to opt for an easy-access saver.
These do what they say on the tin and usually allow for unlimited cash withdrawals.
The best easy-access savings account available is from Ulster Bank, which pays 5.2% – but you need to pay in a minimum of £5,000 and also be a current account customer.
Cahoot’s Sunny Day Saver (Issue 2), offering a 5% interest rate, allows savers unlimited withdrawals and requires just a £1 minimum deposit to open the account.
If you want to build a habit of saving a set amount of money each month, a regular savings account could pay you dividends.
Principality Building Society’s Six Month Regular Saver offers 8% interest on savings.
It allows customers to save between £1 and £200 a month. Save in the maximum, and you’ll earn 27.53 in interest.
While regular savings accounts look attractive due to the high interest rates on offer, they are not right for all savers.
You can’t use a regular savings account to earn interest on a lump sum.
The amount you can save into the account each month will be limited, typically to somewhere between £200 and £500.
Therefore, if you have more to save, it would be wise to consider one of the other accounts mentioned above.
FINDING THE BEST SAVINGS RATES
WITH your current savings rates in mind, don't waste time looking at individual banking sites to compare rates - it'll take you an eternity.
Research price comparison websites such as MoneyFactsCompare.co.uk and MoneySupermarket.
These will help you save you time and show you the best rates available.
They also let you tailor your searches to an account type that suits you.
As a benchmark, you’ll want to consider any account that currently pays more interest than the current level of inflation – 2%.
It’s always wise to have some money stashed inside an easy-access savings account to ensure you have quick access to cash to deal with any emergencies like a boiler repair, for example.
If you’re saving for a long-term goal, then consider locking some of your savings inside a fixed bond, as these usually come with the highest savings rates.