Best savings accounts you need to apply for NOW as experts warn that you ‘need to act quickly’
SAVERS are being urged to act quickly to secure the best deals as competition heats up in the savings market.
Several providers offer interest rates of up to 8% on their top savings accounts, significantly exceeding the national average.
However, Caitlyn Eastell at Moneyfactscompare.co.uk warns that these deals may be short-lived.
Challenger banks, known for their agile pricing strategies, may pull their top rates quickly.
Caitlin said: “Providers may be launching the final push towards meeting their end-of-year targets, so it is possible that further rate adjustments are yet to take place.
“Savers should avoid waiting to pull the trigger on any enticing deals until the new year to avoid disappointment.”
This urgency is heightened by the Bank of England‘s potential interest rate cut in February 2025, which could further depress savings rates.
The Bank’s base rate was maintained at 4.75% yesterday.
However, money markets are betting that interest rates will fall to 3.5% by the end of next year.
The base rate directly influences the interest rates banks offer on products such as mortgages, credit cards, and savings accounts.
When the Bank’s base rate falls, high street and challenger banks tend to lower interest rates on certain savings accounts.
Average savings rates have already been declining over the past 12 months.
Typical easy access rates stand at 2.88%, down from 3.19% in 2023, according to Moneyfactscompare.co.uk.
Similarly, the average one-year fixed bond rate has decreased from 4.31% to 4.1% since December 2023.
That’s why ensuring you’re getting the best rate on your savings is crucial, especially given the possibility of further base rate cuts by the Bank of England in February.
The impact of falling interest rates depends on the type of savings account you hold.
Some accounts have fixed interest rates for a set period, while others, such as easy-access accounts, can see their rates change at any time.
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 Al Rayan Bank’s one-year fixed bond, which pays 4.8%, requiring a minimum investment of £50.
Ziraat Bank’s one-year fixed bond also offers 4.8% back with a minimum investment of £1,000.
This means that if you were to save £1,000 in this account, you would earn £48 a year in interest.
The best notice accounts offer slightly higher rates than the best fixed-term bonds.
These also come with more flexibility when accessing your cash.
The Bank of London and The Middle East’s 90 day notice account offers savers 4.94% back with a minimum £10,000 deposit, for example.
GB Bank’s 90 day notice account offers 4.91% back to those with less money to save, requiring a minimum deposit of £500.
This means that if you were to save £1,000 in this account, you would earn £49.10 a year in interest.
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 Atom Bank, which pays 4.85% – and you only need to pay a minimum of £1 to set it up.
This means that if you were to save £1,000 in this account, you would earn £48 a year in interest.
Gatehouse Bank’s easy access saver offers customers 4.75% back on savings worth £1 or more.
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.
What’s next for savings rates?
Savings rates usually rise and fall with the Bank of England‘s base rate.
This was cut for the second time in four years from 5% to 4.75% in November, but then rates were held at 4.75% in December.
The next interest rate announcement is on February 6.
If interest rates continue to fall, it spells bad news for savers, whose rates typically fall when the Bank’s rate is cut.
However, in the meantime, opting for a fixed bond can be a useful bet to help ride out future cuts to the base rate.
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.