Chase to cut savings rate after base rate reduction – is it still a best-buy?

Chase’s current account and linked saver are a favourite with MoneyWeek readers, but the rate on the savings account is set to fall this week (14 November) by 0.25 percentage points. This will bring Chase’s easy-access savings rate to 3.5% AER.

It comes after the Bank of England cut the base rate from 5% to 4.75% on 7 November. The Chase account pays a tracker rate, which is currently set at 1.25 percentage points below the base rate.

At 3.5%, the new rate is still comfortably higher than the market average of 2.99%. What’s more, Chase isn’t the only provider to evolve its offering in response to Bank of England cuts. Data from Moneyfacts suggests at least 32 providers have cut their rates since the announcement on 7 November. But can you get a better rate elsewhere?

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We take a closer look at Chase’s offering and how it compares to others on the market. Is it still a best-buy savings account?

Is Chase’s savings rate competitive?

One of the reasons Chase’s account has attracted interest in recent months is that it used to offer one of the best rates on the market. As recently as July this year, savers could earn up to 5.1%. However, the offering has become less competitive as the savings market has cooled.

Chase still pays above-average interest, but other providers currently offer higher rates. Some easy-access accounts are still paying up to 5%. This means the new Chase rate is around 1.5 percentage points lower than what you could be earning elsewhere.

It is worth mentioning that some Chase savers are currently earning a higher rate than the advertised deal, having locked into a temporary ‘booster’ deal that has since closed. If you are one of these customers, you will earn an additional 1% until 16 January 2025.

‘Boosted’ customers will still be affected by the reduction on 14 November, in line with the base rate cut. This will take their overall rate from 4.75% to 4.5%.

Of course, the advertised rate isn’t the only thing to look out for when choosing a savings account. You should read the terms and conditions carefully to understand whether there are any criteria you need to meet to qualify.

Some accounts only pay the advertised rate on balances up to a certain level. Others have minimum opening amounts. Furthermore, not all accounts are flexible when it comes to withdrawals.

Unlike some accounts, Chase pays the full rate on all balances over £1. The maximum balance on the account is £3,000,000, but savers should remember only £85,000 is protected under the Financial Services Compensation Scheme (FSCS).

Should you consider a tracker account?

Chase first introduced a tracker approach in May this year, initially setting its savings rate at 1.15 percentage points below the Bank of England base rate. It later upped the margin to 1.25 percentage points.

A tracker approach is a transparent way of setting interest rates, but it means the rate is guaranteed to fall every time the Bank of England makes a cut, unless the terms and conditions on the account change.

The Bank of England has cut the base rate twice in recent months – from 5.25% to 5% on 1 August, and from 5% to 4.75% on 7 November.

There is only one Monetary Policy Committee (MPC) meeting left before the end of the year, but most investors and economists are expecting rates to be kept on hold at that meeting.

Despite this, now could be a good time to fix your savings if you want to lock in higher rates for longer. Chase doesn’t offer a fixed-rate account, but other providers are currently paying up to 4.77%.

Commenting on the latest developments in the market, Mark Hicks, head of active savings at Hargreaves Lansdown, says: “Over the next couple of months, we could see a bit more support for both fixed and easy-access savings, as we potentially see inflationary pressures starting to build again.

“We’re not expecting rates to climb significantly though, so if you’re hanging on for a better deal before you fix, it’s time to stop waiting and get moving.

“You can still get strong fixed rates, especially over six months to two years. So if you’re tired of worrying about what drama politics and the bond markets might hold in store, you can fix any savings you won’t need for that period and get on with the rest of your life.”