The Bank of England’s (BoE) base rate cut in August has sent shockwaves through the savings market, with rates dropping quickly below the 5% mark – lower than the current base rate.
It seems as though the heady days of 5%+ rates on the top savings accounts might soon become a thing of the past. In just a few days MoneyWeek has seen almost all providers lower the rates on the savings products featured in our easy-access savings and one-year fixed savings guides.
We have had a good run of inflation-busting savings rates and decent returns on cash savings. In May 2024, there were over 1,500 inflation-busting savings accounts on the market. Despite this, research shows a large proportion of cash savers are still sitting on low rates, especially those who leave large amounts in current accounts which pay little or no interest. Now more than ever, as interest rates fall, it is time to act as savings inertia will cost you.
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Are banks dropping rates?
At MoneyWeek HQ, we monitor interest rates daily and banks have wasted no time in dropping rates on cash savings. Since the BoE cut the base rate on 1 August, we’ve seen 11 one-year fixed savings accounts and three easy-access savings drop their rates, as well as one product (Oxbury Bank’s 5.04% easy-access saver) that was pulled from the market, on 5 August.
Some one-year fixed-rate accounts that have dropped their rates include:
- Close Brothers 1 Year Fixed Saver - 5.15% to 5% AER.
- Tandem Bank 1 Year Fixed Saver - from 5.12% to 5.01% AER on 1 August. The rate dropped again to 4.75% AER on 6 August.
- Shawbrook Bank 1 Year Fixed Rate Bond - 5.1% to 5.01% AER on 1 August. The rate fell further to 4.91% AER on 6 August.
As the time of writing, only four one-year fixed savings products remain with rates of 5% or above.
Cash ISA rates have also fallen. These are the significant drops we’ve seen:
- Beehive Money pulled its 4.7% two-year fixed-rate cash ISA on 1 August.
- Chip’s best-buy cash ISA rate fell from 5.21% to 4.84% AER on 1 August.
On the easy-access savings landscape, Chase has slashed its rate today (8 August) from 4.1% to 3.85% AER. Goldman Sachs-owned bank, Marcus has also announced cuts to its online savings account. From 23 August, its customers will earn 4.3% AER – down from its current 4.55% AER return.
Banks are perhaps running out of generosity – after all, there was never much of it to start with. In fact, many banks also came under pressure to boost their rates following interest rate hikes between November 2021 and August 2023.
Can I still get good rates on cash savings?
The good news is that there are still a few bank accounts offering good rates. These are worth a look if you have cash to save. The top rates might not hang around, though. If the Bank cuts rates again, you may well miss the savings boat.
Of course, the only way to ‘guarantee’ you’ll earn a certain amount is to opt for a fixed savings account. We list the top deals in our fixed-rate savings guide – at the time of writing, the top deal is 5.15%.
If you think you may need access to your cash sooner, then an easy-access account can still earn you up to 5.2%, though rates may be variable.
Closed accounts
Another important thing you may want to check is the rate on closed or matured accounts. The average closed easy-access account rate has been lower than the live equivalent over the past two years, according to Moneyfacts.
If you have not reviewed your savings in the last two years or more, your bank may be short-changing you.
As of 31 July, closed accounts must comply with new Consumer Duty rules and banks must consider if they offer fair value. But, if you think you are being short-changed, move your money before it is too late as you could be better off by thousands.
The next Bank of England MPC meeting is on 19 September and we may see further rate cuts. Could it be time to lock in those yields now?
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