The top savings deals continue to creep upwards with savers finally starting to see the benefits of the latest quickfire base rate rises over the past three months – from 0.1 per cent to 0.75 per cent.
Atom Bank has fired itself to the top of the independent This is Money best buy savings tables with an easy-access rate of 0.9 per cent – more than double the top rate offered at this point last year.
However, one expert says that the last time the base rate was at 0.75 per cent, the best easy-access rates paid 1.6 per cent, suggesting better deals could be the horizon.
Al-Rayan currently offers the best one year fixed rate deal paying 1.71 per cent and Monument Bank the top two year rate at 2.05 per cent.
Easy access savers haven’t seen a 1 per cent deal since November 2020 and most have their cash languishing in high street accounts paying as little as 0.01 per cent.
Three months ago the best one year deal paid 1.41 per cent and best two year deal paid 1.61 per cent.
However, while we have not seen the best savings rates this high since 2020, with inflation hitting 6.2 per cent as of February, the situation is as bad as it has been for savers – the gap between the best rates and inflation is huge.
Under the circumstances many savers will be wondering where their money will be best served.
Some may choose to do nothing and leave their cash languishing in the easy-accounts of the big banks paying as little as 0.01 per cent – they won’t be alone – the big banks have billions contained in these easy-access accounts.
But plenty of savers will be looking to make the best of a bad situation.
Fixed-rate deals offer the best returns, but easy-access and notice accounts give savers the flexibility to take a wait and see approach, which could be sensible given that rates are expected to rise further.
As savings rates have recovered, any gains savers might have hoped for were rapidly wiped out by soaring inflation.
Rachel Springall, finance expert at Moneyfacts said: ‘The savings market is improving so we could well see even more rate rises in the top rate tables over the next weeks, as providers continue to jostle their market positions to entice deposits.
‘Savers patience could pay off, but obviously with easy access accounts you can move your money freely, so its worth considering and if something better comes along, they can switch.
‘However with fixed, its always a challenge to decide whether to grab something now or wait, especially as we have had a spate of leap-frogging in the top end of the market.’
Could easy-access exceed 1%?
The last time there was an easy-access deal paying in excess of 1 per cent was November 2020.
Back then, NS&I were paying 1.15 per cent on its Income Bonds and 1 per cent on its Direct Saver account. They were both brutally cut to 0.01 per cent and 0.15 per cent respectively.
Last year easy-access rates hit rock bottom. The average easy-access dropped to 0.15 per cent, according to Moneyfacts and best deal on the market at one point only paid 0.41 per cent.
Atom Bank’s rise is perhaps the clearest indication that a 1 per cent easy-access rate will arrive soon.
Virgin Money also recently launched a linked savings accounts for its current account customers paying 1 per cent on balances up to £25,000.
With inflation expected to rise over the coming months and the Bank of England expected to announce further base rate rises in response, the feeling among experts is that the top of the savings market will continue to nudge higher.
Anna Bowes, co-founder of Savings Champion said: ‘With another base rate rise under our belt, we should expect to see rates rise further.
‘The last time base rate was at 0.75 per cent, between August 2018 and March 2020, the best buy easy-access rates got as high as 1.6 per cent and fixed rate bonds were even higher. The best one-year deal was paying as much as 2.15 per cent.
‘Savers desperately need rates to get back to at least these levels.’
| Type of account (min investment) | 0% tax | 20% tax | 40% tax | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ONE YEAR | ||||||||||||
| Al Rayan Bank (£5,000+) (1) | 1.71 | 1.37 | 1.03 | |||||||||
| Close Brothers Savings (£10,000+) | 1.65 | 1.32 | 0.99 | |||||||||
| 18 MONTHS | ||||||||||||
| Al Rayan Bank (£5,000+) (1) | 1.80 | 1.44 | 1.08 | |||||||||
| Shawbrook Bank (£1,000+) | 1.72 | 1.38 | 1.03 | |||||||||
| TWO YEARS | ||||||||||||
| Monument Bank (£25,000+) | 2.05 | 1.64 | 1.23 | |||||||||
| Al Rayan Bank (£5,000+) (1) | 1.96 | 1.57 | 1.18 | |||||||||
| THREE YEARS | ||||||||||||
| Al Rayan Bank (£5,000+) (1) | 2.11 | 1.69 | 1.27 | |||||||||
| Secure Trust Bank (£1.000+) | 2.01 | 1.61 | 1.21 | |||||||||
| FIVE YEARS | ||||||||||||
| Monument Bank (£25,000+) | 2.40 | 1.92 | 1.44 | |||||||||
| Secure Trust Bank (£1,000+) | 2.30 | 1.84 | 1.38 | |||||||||
| (1) This rate is the ‘expected profit rate’ under Sharia compliant accounts. The bank monitors the target profit on a daily basis to ensure it is achievable. | ||||||||||||
Should you hold off fixing?
With challenger banks continuing to drive up rates at the top of the market, savers may be wary of locking in when they could end up kicking themselves for missing out on an even better deal only days later.
James Blower, founder of The Savings Guru said: ‘I can’t see any reasons currently for rates to go in any other direction but up.
‘I won’t be at all surprised if one year deals get to 2 per cent in the second half of the year and two year deals head towards 2.3 per cent to 2.4 per cent.’
The advice to savers is to consider fixing to secure a better rate but to avoid doing so for too long.
‘I certainly wouldn’t be fixing beyond one year at the moment,’ adds Blower, ‘I think savers locking away on longer term fixes may look back and regret that in the coming months and years.
‘However, with the one year fixed best buy at 1.71 per cent, that’s almost double the best easy access rate and that is enough of a premium to warrant fixing now and then seeing where rates are this time next year.’
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