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Savings rates hold up despite volatility

20 June 2024

High street banks continue to offer disappointing rates.

By Matteo Anelli,

Senior reporter, Trustnet

The savings market has been volatile this year, but savers can still profit from advantageous rates if they know where to look.

With inflation reaching 2% and the Bank of England’s Base rate expected to drop by the end of the year, savings rates could have followed the downward trend, but instead they have barely nudged so far.

Since the start of December 2023, the average easy access savings rate has fallen from 3.18% to 3.12%, while for ISA accounts it remained at 3.31% – the same level as six months ago, data from Moneyfactscompare shows. In the last month, the rate has risen for non-ISA accounts but the ISA version fell month-on-month.

Similarly, notice account averages have budged a few basis points – from 4.44% to 4.26% since December 2023 for non-ISA accounts and from 4.25% to just 4.14% for ISA rates.

Rachel Springall, finance expert at Moneyfactscompare, said savers may feel relieved that rates have not fallen too much over the past six months. However, they should still make sure they aren’t missing out on returns.

“The top rate tables continue to be dominated by challenger banks and building societies. With the average rate on easy access accounts around 3%, there will be many savers out there getting a poor return,” she said.

“Consumers would be wise to review their rate if they have not done so over the past six to 12 months. Loyalty does not always pay, and potentially, more interest could be earned from the more unfamiliar brands.

“The Cash ISA market has also seen a flurry of activity over the past six months, but variable rates are slightly down month-on-month. This should not deter savers from reaping the benefits of investing cash in an ISA wrapper, to protect any interest earned from tax.”

In fact, the distance between high-street and challenger banks has increased. Today, the average rate paid by the former is 2.01% – an increase of 0.57% year-on-year from 1.44%, but it compares to a year-on-year rise of 0.91% across the entire easy-access market.

“It is very unpredictable to know where interest rates are going, so as variable rates can fall as well as rise, some savers may want to take advantage of a fixed rate bond or ISA for a guaranteed return if they are concerned interest rates will fall in the months to come,” Springall added.

“Whichever savings account consumers choose, it’s important they are aware of any restrictive criteria, keep on top of the best rates across the savings spectrum and proactively switch.”

 

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