Savers may want to lock in savings rates of more than 5% now ahead of the Bank of England’s interest rate meeting next week.
The Bank’s Monetary Policy Committee is expected to continue cutting rates this year, although it will face a balancing act of tempering higher inflation without stymying economic growth.
Rachel Springall, finance expert at Moneyfacts, said: “Savers may be concerned about the expectations for interest rates to come down this year, so a longer-term fixed bond could become more desirable.”
Indeed, for those looking to lock their money away the top rate available is a five-year bond offered by JN Bank, which pays 4.8% based on a lump sum investment of £25,000.
There is not much between the top rates over different timeframes, however. Savers who want to put money away for three years can get a 4.63% rate from Birmingham Bank, while the top one-year rate of 4.77% comes from Vida Savings.
The best interest rates come from regular easy-access savings accounts. Chase is currently offering 5%, which includes a bonus for six months of usage, while Atom Bank is just behind at 4.85%.
Those who take out notice accounts with up to 180 days to withdraw their money can make slightly more. Plum’s 95-day premium notice account pays 5.05%, with OakNorth Bank’s 4.95% in second place.
The same phenomenon occurs in the world of ISAs. The top easy-access cash ISA is offered by Trading 212 and gives a 5.12% rate. Moneybox (5.11%) and Plum (5.01%) are in second and third place, with all rates including a bonus after 12 months.
Meanwhile, the top fixed rates are lower inside an ISA than outside of the tax wrapper. Close Brother Saving’s market-leading 4.55% on a one-year cash ISA is 22 basis points behind the best comparable rate outside of an ISA.
This is the highest rate available, with interest tapering down to 4.42% over three years and 4.25% over five years.
Most of the top rates come from challenger banks. Springall said the largest high street banks do not have to up rates to keep customers due to their “legacy”, while upstarts have to “work hard to improve their market positions and gain trust”.
Indeed, a Moneyfacts study found four of the five major banking brands sit in the bottom quartile of the easy-access savings market.
Only the Flexible Saver from HSBC sat in the third quartile of the market, paying 1.74% as of last week, a marked drop from September 2024, when flexible savings accounts from Barclays, NatWest and Santander were also in the third quartile of the market. These have since cut their rates, she noted.
“It will be disheartening news for savers to find the biggest banks have cut rates on their most flexible savings accounts, resulting in a further drop in their market positions,” Springall said.
“Savers who prefer to have their cash at hand will unsurprisingly feel disgruntled that the situation has only worsened; as the Bank of England made base rate cuts, the big banks were soon to follow.”
If the Bank of England decides to cut rates once again next week, as is predicted by some analysts, savers may need to hunt around for the best deals and get into these 5% rate accounts while they are available.