Warning for savers as interest rates remain frozen for the third time

Snap up the best savings rates quickly, as the third interest rate freeze could push rates down further

Jar of coins
(Image credit: Deborah Pendell)

As anticipated, the Bank of England (BoE) has frozen the base rate at 5.25% for the third time, and while savings rates have reached a 15-year high, experts warn that this could cause lenders to drop their rates further- so savers should snap up the top deals fast. 

It comes as new research by Shawbrook Bank reveals that 40% of savers don’t know how much they’re earning on their savings, and 24% are earning 2% or below- missing out on hundreds of pounds in interest. 

Savers will need to act fast if they want to bag a better return, as shortly after interest rates were paused for the second time at 5.25% on 2 November, savings reached their peak on 10 November, and rates have been falling ever since. 

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“We’ve already seen cuts to savings rates, particularly in the fixed rate market, and that’s a trend that’s going to continue,” says Laura Suter, director of personal finance at AJ Bell.

“This means savers need to move if they haven’t yet locked in a fixed-rate deal – anyone who has been waiting for rates to improve should start shopping around now.”

Find out where interest rates are predicted to go in 2024 and what this means for savings. 

What will happen to interest rates in 2024? 

The good news is, that even though the base rate has been paused, it remains historically high, above the 5% mark, so “there is still time for savers to make their money work as hard as possible and get a great return,” says Stephen Sillars, savings and investment editor at wealth app, Chip. 

However, experts predict that the BoE will cut the base rate in 2024, which means savings rates will follow. 

We’ve already seen lenders pull top savings rates due to high demand too, which is more of a reason to start searching for the best savings deal now. 

One-year fixed savings hit above 6% in the summer, with NS&I’s market-leading 6.2% one-year fixed saver- but this was pulled within five weeks of being on the market. Similarly, Santander’s top paying 5.2% easy access account got pulled a week early. 

What does the current savings market look like and what are the top rates you can earn right now? 

Savings rates are falling 

Even before the much-anticipated base rate freeze, savings rates have been gradually falling. 

Metro Bank currently offers the top easy-access savings account, at 5.22% AER. But this is a limited edition product which means it could have a short lifespan on our best-buy guide. 

MoneyWeek research shows easy access rates have been dropping at a slow pace, but according to Investec Bank, more than half of the top easy access accounts are being hit with restrictions on withdrawals or rely on short-term bonuses for better returns. 

For example, this 7% AER Santander Edge account is only available to Santander Edge current account holders, and the 7% rate includes a 2.5% bonus for the first 12 months. 

Ulster Bank’s Loyalty Saver which comes just below Metro Bank’s saver is offering 5.2% AER. Yet, even this account is subject to conditions- balances below £5,000 will earn 2.25% AER on savings. 

How does a one-year fixed account compare to easy access? 

When you consider the many restrictions imposed on an easy-access account, you’re not far off from fixing your cash if you’re being hit with two to three withdrawal limits per year. 

Historically, fixed savings also offer better rates than easy access accounts, but lenders are dropping rates dramatically on one-year fixed accounts. 

Metro Bank just dropped its top-paying 5.8% one-year fixed saver to 5.66% AER two days ago, leaving the top rate now being offered by Union Bank of India, at 5.7%. 

A further four providers have also dipped their one-year fixed rate in the past 24 hours:

Adam Thrower, head of savings at Shawbrook warns: “today’s favourable rates are not permanent, and with each passing month, we edge closer to the possibility of interest rates decreasing, so savers should be careful and make the most of their money now.” 

Vaishali Varu
Staff Writer

Vaishali has a background in personal finance and a passion for helping people manage their finances. As a staff writer for MoneyWeek, Vaishali covers the latest news, trends and insights on property, savings and ISAs.

She also has bylines for the U.S. personal finance site Kiplinger.com and Ideal Home, GoodTo, inews, The Week and the Leicester Mercury

Before joining MoneyWeek, Vaishali worked in marketing and copywriting for small businesses. Away from her desk, Vaishali likes to travel, socialise and cook homely favourites