UK interest rates are frozen at 5.25%. Is it a wake-up call for cash savers?

The Bank of England has held interest rates at 5.25%, but we could see a base rate cut in the summer. Are cash hoarders about to miss the boat to lock in high yield on their money?

Digitally generated image of golden piggy bank. Concept of fintech technology, new banking and savings.
(Image credit: Getty Images)

Today’s interest rates decision from the Bank of England to hold the base rate at 5.25% comes as no surprise. Even the voting remained unchanged. 

In fact, it was so expected, an eager press release made its way into my inbox well ahead of the announcement with reaction to the news. 

While the base rate remains unchanged for the seventh meeting in a row, this time was different. This time, inflation was at its target level of 2% - a figure prime minister Rishi Sunak couldn't wait to boast about as I opened my Instagram blurry eyed on Wednesday morning.

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And of course, he was right to be smug about it after all, inflation was at around 11% when he became prime minister.

But, the inflation slowdown was not enough for Bank officials to push ahead with a rate cut, clearly uncomfortable with some data.

Though the headline rate is back to 2%, core and services inflation rate is still high with core inflation at 3.5% in the 12 months to May (down from 3.9% in April) and services inflation is at 5.7% (down from 5.9%).

Food prices are still 25% higher than they were a year ago and petrol prices have also crept up.

But, there are expectations that we may see a rate cut in the summer if inflation does not creep up.

Wake-up call for savers

While the frozen rate, which is at a 16-year high, means continued misery for borrowers, it could be the final golden opportunity to boost your cash savings.

It’s very likely now that you may have missed the peak of top interest rates, but the opportunity to grab a decent rate is still there. But you have to act now and overcome the savings inertia.

According to Moneyfacts, there are more than 1,000 inflation-busting savings accounts - and in fact, at the moment, the top easy access (stress on ‘easy access’) is 5.1% with Chase

According to the Financial Conduct Authority, millions of consumers are holding thousands in accounts that pay little or no interest.

I decided to do my own research with a snapshot poll and asked a few people where they keep most of their savings - the answer shocked me, though perhaps not surprised me. 

Nine out of 10 people I asked told me they held most of their money in their current account that paid no interest. One was earning 3.25% on up to £5,000 - and the rest was 0%.

When I asked why they were not putting the money into savings, most people said it was because they needed the money. If you happen to be in a similar situation, a quick reminder that easy access does what it says on the tin - you can access your money with ease and still take advantage of a decent rate.

The top easy-access savings on the market right now are:

  • Chase - 5.1% - available if you open a current account. It is also available to existing customers who had under £50,000 saved on 2 May. The rate will drop to 4.1% on 16 January. Interest is paid monthly and you can open the account with £1. 
  • Oxbury - earn 5.02%. Minimum needed to open the account is £20,000 and interest is paid monthly. Oxbury said the account is a limited addition and may be withdrawn without notice.
  • Monument Bank. Earn 5.01%. Minimum balance to open an account is £25,000. Interest is paid monthly. 
  • If you have a Santander Edge current account - you can bag 7% on balances up to £4,000. It includes a 3.5% bonus for the first 12 months, so the rate will drop a year later.

And if you're willing to fix, you could earn around 5.5% once the fixed period ends - for example, Nationwide offers 5.5% if you lock your cash away for 18 months. Oxbury lets you earn 5.22% over six months.

Money market funds

For investors, it may also be the time to lock some cash into a money market fund, which can be part of your ISA or Sipp. 

According to fund supermarket interactive investor, some short-term money market funds to consider are:

  • Royal London Short Term Money Market - 5.22% yield
  • L&G Cash Trust - 5.2% yield
  • Fidelity Cash - 5.16% yield
  • BlackRock Cash - 5.06% yield

The highest yielding standard money market funds to consider are:

  • Premier Miton UK Money Market - 5.09% yield
  • Invesco Money  - 4.01% yield
  • Abrdn Sterling Money Market - 5.5% yield
Kalpana Fitzpatrick

Kalpana is an award-winning journalist with extensive experience in financial journalism. She is also the author of Invest Now: The Simple Guide to Boosting Your Finances (Heligo) and children's money book Get to Know Money (DK Books). 

Her work includes writing for a number of media outlets, from national papers, magazines to books.

She has written for national papers and well-known women’s lifestyle and luxury titles. She was finance editor for Cosmopolitan, Good Housekeeping, Red and Prima.

She started her career at the Financial Times group, covering pensions and investments.

As a money expert, Kalpana is a regular guest on TV and radio – appearances include BBC One’s Morning Live, ITV’s Eat Well, Save Well, Sky News and more. She was also the resident money expert for the BBC Money 101 podcast .

Kalpana writes a monthly money column for Ideal Home and a weekly one for Woman magazine, alongside a monthly 'Ask Kalpana' column for Woman magazine.

Kalpana also often speaks at events. She is passionate about helping people be better with their money; her particular passion is to educate more people about getting started with investing the right way and promoting financial education.