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UK households are always looking for ways to make their money go further amid the crisis. cost of living crisis and savings accounts can help.
After years of low rates, high-yield savings accounts are experiencing a boom as the Bank of England decided to keep interest rates at 5%. While homeowners face higher mortgages, higher borrowing costs have a silver lining: consumers can find savings accounts in the UK that offer rates that beat inflation.
According to figures from the Office for National Statistics (ONS), the UK inflation rate stood at 2.2% in August, unchanged from July. It was 2% in June and May.
Savers should shop around to find the best deals and check what interest rate they have, as they could still be stuck with a product that doesn’t beat inflation. Providers could also start cutting rates as interest rates fall, so consumers should check whether their money is well placed to earn higher returns.
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Finder.com finance expert Liz Edwards has advised savers to secure the best rates available. “Today’s decision, while disappointing for borrowers, serves as a reminder for savers to take advantage of the higher rates on fixed rate accounts,” said Edwards.
Finder’s research revealed that eight of the UK’s 16 biggest banks have already cut rates on easy-access savings accounts since the Bank reduced the base rate earlier this month.
Mark Hicks, head of active savings at Hargreaves Lansdown, echoed this sentiment: “The decision to keep rates steady is positive for savers. Had a rate cut occurred, we would have seen a quick response from other banks and building societies.”
For those who have money in easily accessible accounts, switching to a fixed-rate account could be a prudent decision to preserve returns.
The main factor you need to consider when choosing a savings account is the difference between an easy-access account and a fixed-term account.
Easy-access accounts allow you to access your money when you need it. Fixed-term accounts mean you can’t access your cash for the duration of the transaction. They often offer better interest rates, but you need to be comfortable with not touching your savings for a long period, usually between one and five years.
What are the best high-interest fixed accounts?
The best fixed rate account offers 5.30% and is available at GB Bank, through the Prosper platform.
This fixed-term personal savings account requires a minimum of £20,000 which will be locked for six months. You can invest up to £85,000. No withdrawals are allowed during the term of the agreement and you can only open this account through the Prosper app.
A 5.15% offer is available on the Raisin platform, provided by Mizrahi Tefahot Bank. This fixed-term personal savings account requires a minimum of £1,000 which will be locked for 3 months. You can invest up to £85,000.
GB Bank also offers a 6 month 5.03% deal through Prosper, but that requires just £1000 to open.
Online banks typically offer higher rates than traditional brick-and-mortar branches, which translates into better returns and gives you a more efficient way to save and achieve financial goals.
If you prefer to go with a familiar name, traditional lenders have slightly lower offers, but are still above inflation.
Tesco Bank offers the highest rate among traditional lenders, with a one-year fixed rate savings account which pays 4.61%, with the minimum balance required being £2,000.
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Nationwide (NBS.L) offers a fixed rate savings product offering 4.35% over one year. The minimum deposit is just £1 and you must be registered with Nationwide’s online bank.
How do fixed-rate savings accounts work?
Unlike easy-access savings, where interest rates can vary, fixed-rate accounts earn a fixed interest rate for the period you choose, whether that’s six months or one, two, three or even five years. Those are the most common offerings, but some go as long as 10 years or more.
You must leave your initial deposit for a certain period without making any withdrawals. If you touch your money, you will lose the interest.
What are the best easy-access savings accounts?
Easy-access savings accounts allow you to withdraw your money without notice. That ease of access comes with lower interest rates, but they are a good option for those who think they might need their money urgently.
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Please note that the rates on these accounts are variable, meaning they can go up or down. You will be notified of any changes in advance.
Ulster Bank offers the highest payout offer for easy access accounts at 5.20%. To qualify for this rate, you need £5,000 and there is no maximum limit.
West Brom Building Society pays 4.9% with an easy-access account that pays interest monthly. If you invest a £1,000 deposit, the estimated balance after 12 months would be £1,049.
Oxbury offers a 4.87% deal that pays interest monthly for those who have a minimum of £25,000 to open the account, which is done through an app. You can invest up to £2,000,000.
There are even easy-access accounts with higher returns, but they are not aimed at new customers. For example, Santander’s Edge Saver (BNC.L) offers 6%, but is only aimed at current account holders.
What are the best savings accounts with advance notice?
Can’t decide whether you want to keep your money and not touch it for a long period or have it accessible at all times? Maybe you should consider a savings account with advance notice.
Notice savings accounts require you to notify your savings provider before you can withdraw your funds.
They are ideal for those who know when they might need their cash but don’t want the temptation of reaching for it at any moment.
You must give your bank or credit union some notice before you can withdraw your money, usually between 30 and 120 days.
Santander, through Prosper, offers a 365-day offer that pays 5.50%, the best offer on the market. To open it, you will need at least £20,000 and you can deposit up to £250,000. The same bank offers a 185-day notice account that pays 5.34% with the same requirements.
DF Capital has a 90-day notice account that pays £5.30. You need at least £1000 to open it, which can be done over the phone, online or by email.
Interest rates on notice accounts are variable, meaning they could go up or down over time.
What are the best regular savings accounts?
For those looking to make the most of their cash savings, regular savings accounts offer returns of more than 10%.
Most standard savings accounts require money to be set aside each month and interest is paid annually. It is not uncommon for the offer to be available only to current customers.
Principality offers 8% on a regular six-month savings account. You open an account and deposit up to £200 each month. Interest is calculated on the money in the account each day and paid six months after opening.
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Yorkshire Building Society also offers an 8% rate on its regular £50 eSaver account. It requires a minimum deposit of £1 to open and can pay up to £50 per month.
The Co-op bank has a 7% offer for existing customers. With a one-year fixed fee, you can save up to £250 a month and you can skip months without penalties.
Each arrangement mentioned here is covered by the Financial Services Compensation Scheme, so you are protected up to £85,000 or double that if it is a joint account.
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