Why you need to act fast to get the best deals on savings accounts
Interest rates on savings accounts are rising fast. We look at what banks are doing to attract cash holders and why you need to act now.
Savings accounts are starting to look more attractive than they have for years as banks boost the rates on offer to attract more cash.
While rising interest rates have meant bad news for mortgage owners, with rates on two-year fixed rate mortgages hitting fresh highs of 6.46%, for savers it has become an opportunity to earn more on their money at rates we have not seen since 2008, with some offering a table topping 5% return on cash.
However, these deals may not stay around for long. Here’s why you need to act now to snap up the best savings accounts.
What are the best savings accounts on offer?
Banks are stepping up the offers on savings accounts in a bid to raise assets which they can then lend out for mortgages and loans in a high interest environment.
This is good news for cash savers, who can currently earn as much as 5% on cash savings. However, the deals may go as quick as they come, so you’ll have to act fast to bag the best interest rates for savings accounts.
Some of the top deals available right now include:
- Nationwide’s FlexDirect current account, which gives you 5% interest on balances of up to £1,500 for the first twelve months. After that this drops to 0.25%.
- Al Rayan Bank’s Everyday Saver offers a rate of 2.35% – it is an easy access account.
- Newbury Building Society’s Instant Access Saver offers 2.10% (although the account is restricted to customers living in certain postcode areas)
If you’re happy to lock your cash away for a year you will earn a higher return rate, typically over or around 4%, but won’t be able to touch your money for 12 months. These include:
- Coventry Building Society’s Fixed Bond account offers a 4.40% rate fixed at 12 months
- Aldermore’s One-Year Fixed Rate account gives you 4.35%.
There are also two-year fixed term savings accounts, and even a five-year fixed account from Atom Bank. For the first time in over ten years savers can earn 5% on their savings. This would mean someone who invested £10,000 would earn £2,763 over the time period.
These are just some of the deals on offer right now. We have also put together a list of the best savings account on the market at the moment.
However regardless of how attractive the rate looks, locking your money away for five years or more might not be the smartest option.
Should you have a cash savings account?
Cash savings have a place for emergency funds and short term savings and it is important to hold cash as well as investments. But remember, although interest rates are up, inflation is higher at over 9%, meaning in real terms, cash earning an interest rate below inflation is losing value. So, for long term savings, investing is still a good option.
However, the current environment means now is a good time to review your cash and look to place it somewhere where you can earn a decent rate of interest.
“We often see people hold on to cash when the markets are volatile, but remember, market volatility is normal – and as long as you are only investing money for the long term, you can potentially grow your money to beat inflation and see a greater benefit from compounding,” says Kalpana Fitzpatrick, senior digital editor of MoneyWeek and author of Invest Now.
“Having said that, if you have cash savings as part of your short-term savings, then I would certainly take the opportunity to grab the likes of 4.40% for a one year fixed period. Now is certainly the time to come out of those poor paying accounts we have all been stuck in for too long.”
You’re going to have to be quick to secure the best deal. Providers put out their deals to raise a desired amount of money, and once they’ve secured that they withdraw them. This leaves only a small, up-to-date pool of savers to cash in on the best rates.
Rising interest rates are bad news for borrowers
While savers are benefiting from the Bank of England’s interest-rate rises, those borrowing money are getting the short end of the stick.
According to the latest data from Moneyfacts, the rate on a typical two-year fixed-rate mortgage rose to over 6% for the first time in 14 years. Five-year rates have now reached 6.32%, a 12-year high.
And more interest rate rises are on the cards, meaning things will only get more difficult for those with any type of debt to repay.