Savings rates more than double in a year as challenger banks top the best buy tables

The best savings rates have doubled - and in some cases tripled - in a year, with challenger banks offering the highest rates. While they are still no match for inflation, we look at what you could be earning.

Top-down view of piggy banks on yellow background
(Image credit: Getty images)

Savings rates have soared over the past year, with savers able to scoop up a rate as high as 6.44% on a fixed-rate bond.

While savings rates have naturally risen due to the Bank of England pushing up the base rate from 0.25% to 5% over the past 18 months, fierce competition among challenger banks has also had a big impact.

Challenger banks - some of which you may not have heard of - have been aggressively hiking rates to stay at the top of the best-buy tables. 

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In the space of a month, the top two-year savings bond has jumped from 5.6% to 6.24%, according to the comparison site Moneyfacts. In terms of easy-access accounts, Chip offers the best rate at 4.51%, leap-frogging Principality Building Society, which offered the best rate a month ago (4.01%).

In 14 savings categories monitored by Moneyfacts, challenger banks offer the top rates in 12 of them. These include BLME, Vanquis Bank, Hampshire Trust Bank, UBL UK and RCI Bank. 

They may not be household names, but they are all regulated by the Financial Conduct Authority and covered by the Financial Services Compensation Scheme. If you think you’re stuck on ‘rip-off’ savings rates then it could be time to switch your cash over and get a better rate. 

Interestingly, the high-street bank to offer the best rates in the other two savings categories is NatWest, with a 5.7% one-year fixed cash ISA, and 5.9% for a two-year ISA.

The top rates in all 14 categories have more than doubled over the past year. In fact, the best easy-access ISA has tripled, from 1.4% (Cynergy Bank) to 4.2% (Principality Building Society). The best notice ISA has had an even bigger jump, from 1.4% a year ago (Aldermore) to 4.45% (Marsden Building Society).

However, there are still no savings accounts that can outpace inflation, which is currently 7.9%. The Consumer Price Index (CPI) fell to 7.9% during June, from 8.7% in May. 

Best savings rates

Here are the top savings accounts across 14 categories. It shows the best account two years ago, one year ago, a month ago (all on inflation announcement dates) and today.

Savings market analysis

Swipe to scroll horizontally
Top savings deals at £10,000 gross14-Jul-2120-Jul-2221-Jun-23Today
Easy access accountICICI Bank UK – 0.50%Al Rayan Bank – 1.60%**Principality BS – 4.01%DF Capital – 4.55%
Notice accountOakNorth Bank – 0.76% (120-day)OakNorth Bank – 2.05% (120-day)RCI Bank UK – 4.85% (95-day)BLME – 5.15% (90-day)
One-year fixed rate bondGatehouse Bank – 1.10%**Tandem Bank – 2.75%Ahli United Bank (UK) plc – 5.70%Vanquis Bank – 6.15%
Two-year fixed rate bondJN Bank – 1.21%Gatehouse Bank – 3.10%**Investec Bank plc (Raisin UK) – 5.60%Investec Bank plc (Raisin UK) – 6.24%
Three-year fixed rate bondUBL UK – 1.33% (payable on maturity)Aldermore – 3.15%Investec Bank plc (Raisin UK) – 6.00%Investec Bank plc (Raisin UK) – 6.44%
Four-year fixed rate bondJN Bank – 1.45%Aldermore – 3.20%RCI Bank UK – 5.55%Hampshire Trust Bank – 5.85%
Five-year fixed rate bondUBL UK – 1.72% (payable on maturity)PCF Bank – 3.45%RCI Bank UK – 5.55%RCI Bank UK – 5.80%

**Islamic bank, pays an expected profit rate. Inflation announcement dates.


ISA market analysis

Swipe to scroll horizontally
Top savings deals at £10,000 gross14-Jul-2120-Jul-2221-Jun-23Today
Easy access ISAMarcus by Goldman Sachs® - 0.50%Cynergy Bank – 1.40%Shawbrook Bank – 3.78%Principality BS – 4.20%
Notice ISAAldermore – 0.35% (30-day)Aldermore – 1.40% (30-day)Teachers BS – 4.00% (120-day)Marsden BS – 4.45% (180-day)
One-year fixed rate ISAOakNorth Bank – 0.72%Secure Trust Bank – 2.15%Virgin Money – 4.75%NatWest – 5.70%
Two-year fixed rate ISAOakNorth Bank – 0.86%Virgin Money – 2.56%Virgin Money – 4.91%NatWest – 5.90%
Three-year fixed rate ISAUBL UK – 1.07% (payable on maturity)Aldermore – 2.75%Virgin Money – 5.00%Virgin Money – 5.55%
Four-year fixed rate ISAHodge Bank – 0.65%Gatehouse Bank – 2.45%**United Trust Bank – 4.85%United Trust Bank – 5.15%
Five-year fixed rate ISAUBL UK – 1.34% (payable on maturity)UBL UK – 2.74% (payable on maturity)United Trust Bank – 4.90%UBL UK – 5.54% (payable on maturity)

**Islamic bank, pays an expected profit rate. Inflation announcement dates.


Strong competition in the one-year bond market

One-year bonds have seen the most competition with rates changing frequently, according to Moneyfacts.

Rachel Springall, the website’s finance expert, comments: “The one-year fixed bond arena takes centre stage for rate volatility as providers have been keen to increase their rates to grab a prominent position in the top rate tables. Several providers now offer 6% to savers who are prepared to lock their money away for at least one year. Those savers who have a maturing one-year fixed bond may well realise the rates are more than double the top rates offered a year ago. 

“This area of the market is brimming with challenger banks, and they traditionally move quickly to attract deposits to fund their future lending. Savers will have to move fast to grab a top rate from such a volatile market.”

Chris Daniels, chief commercial officer of the challenger bank SmartSave, says there is a “huge gulf” between the base rate and the rates available on many savings products. “The larger banks, for example, are offering relatively low rates of between 0.9% and 1.75% on easy-access savings accounts. Fixed-rate products, particularly those not on the high street, are offering far higher returns. Those in a position to lock their savings away are likely to benefit from stronger returns and a better chance at protecting their money from the effects of inflation.”

Easy-access accounts and ISAs improving

Two years ago, the top easy-access accounts paid just 0.5%, but there are now a variety of deals that pay more than 4%. These accounts are suited to savers who want flexibility and peace of mind that they can access their cash quickly. 

Springall notes: “However, it’s vital consumers carefully check the terms and conditions of every account, as some can restrict withdrawals.”

Cash ISA rates are also improving, which is ideal for those who want to use their tax-free ISA allowance - perhaps because they are worried about being hit with savings tax, which is a very real problem for higher-rate and additional-rate taxpayers as interest rates rise. 

Will savings rates keep going up?

Slowing inflation may mean that the big savings rate hikes are now behind us. Experts believe some of the best rates may quickly be pulled from the market, as banks and building societies take stock of what may happen with inflation and future base rate changes.

So, if you’ve been thinking of taking out a fixed savings rate, now could be the time to do it, as it’s unclear whether rates will surge higher - or could even fall. This is especially true given that inflation is likely to fall again this year and be lower in a year’s time (it is predicted to be 3.4% in the second quarter of 2024), meaning opening a one-year fixed savings account now could be a prudent move. 

Having said that, Springall believes savings rate “improvements may well surface in the coming weeks if providers consider the latest base rate rise and volatility surrounding future interest rate expectations.”

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Ruth Emery
Contributing editor

Ruth is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times. 

A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service. 

Outside of work, she is a mum to two young children, a magistrate and an NHS volunteer.