Savers now have access to the best savings rates seen since 2008 as competition heats up among banks, data from Moneyfacts shows.
Some of the best rates on the market include Nationwide’s table-topping 8% regular saver and Al Rayan Bank’s one-year fixed bond via Raisin* offering 6.12% AER.
This is particularly good news for those who put money into a one–year fixed savings account this time last year when rates started to climb, as they can now secure an even higher rate.
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In fact, says Hargreaves Lansdown, around £35bn is currently stored in fixed-rate accounts that will mature over the next six months, and if savers don’t act and instead allow the money to roll over into an easy access account, they would miss out on a total £1.5bn of interest.
But, since the Bank of England decided to halt its recent string of rate rises, holding the base rate at 5.25% last month, banks have been dropping rates on their savings products, with some even withdrawing accounts from the market - so you will need to act now to snap up the best rates.
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Fixed savings account holders could miss out on £1.5bn of interest
It’s estimated that between £25bn and £35bn is held in fixed-rate accounts that will mature over the next six months.
“Relentlessly rising Bank of England rates, and a flurry of competition from smaller and newer banks and building societies, means you can currently fix over one year at around 6% or more,” says Sarah Coles, head of personal finance at Hargreaves Lansdown.
“However, when fixed rates mature, there’s the risk that we forget to do anything about it. In many cases, when your rate comes to an end, a fixed rate deal will roll over into a far less rewarding easy access account – or back into the account you paid in from. If all the maturing money did this, we could miss out on an estimated £1.5 billion in interest.”
Savers have access to far better rates now than they did last year, making it more important than before to make sure you’re storing your money in an account with a more attractive rate.
“The average one-year fixed bond rate was 2.29% in September 2022; it’s now 5.34%, on a £20,000 lump sum investment, that’s an extra £610 in interest after one year,” says Springall.
Savings providers are pulling top rates
The average rates on one-year fixed bonds and ISAs all stand above 5% for the first time since late 2008, while the average easy-access savings account rate is at 2.95%, its highest level in the same period.
However, MoneyWeek has been tracking savings rates and since the base rate was held at 5.25%, banks have started to pull their rates, particularly on one-year fixed bonds moving away from the 6% mark.
We’ve already seen NS&I withdraw its market-leading one-year fixed saver, offering 6.2% AER, and other banks are starting to follow suit.
Beehive Money’s one-year fixed saver was offering a competitive rate of 6.1% AER, but that has also been pulled this week. Other banks that have lowered their rates include:
- SmartSave one year fixed saver dropped its rate from 6.06% to 5.99% AER
- Stream Bank’s one-year fixed saver rate fell from 5.9% to 5.25% AER
- Ford Money one one-year fixed saver dropped its rate from 6.05% to 5.95% AER
As for ISAs, they still remain competitive. MoneyBox hiked the rate on its table-topping cash ISA to 5% AER. And Virgin Money takes the top spot on one year fixed cash ISAs, offering 5.85% AER.
But savers will have to act fast to secure the best deals. Santander launched a 5.2% easy access savings account but pulled it early due to high demand.
“According to our own data, the average shelf life of fixed rate bonds stands at 32 days, which is much lower than 46 days six months ago,” said Rachel Springall, finance expert at Moneyfacts. “This means savers will have less time to grab a fixed rate bond compared to the start of the year, so it’s imperative they sign up to rate alerts to stay in the know.”
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