Savers are being encouraged to act now and lock in the best deals on cash accounts before interest rates drop in the not-so-distant future.
Despite today’s decision by the Bank of England to hold the base rate at 5%, the direction of rates – and consequently the interest on savings products – is downwards, according to Myron Jobson, senior personal finance analyst at interactive investor.
"Even though interest rates haven’t budged, the personal finance landscape remains dynamic in anticipation of further cuts to the base rate in the not-too-distant future,” he said.
"The message to savers is simple: get your skates on and secure the best savings deals while you still can.”
Below, Trustnet highlights the best savings accounts available today using data from Moneyfactscompare, based on a lump sum of £10,000.
The best-payer today is Ulster Bank’s easy-access account Loyalty Saver, which pays an annual equivalent rate (AER) of 5.20%. It is 30 basis points ahead of the second-best account, the Four Access Saver by the West Brom building society.
Both these rates are variable and could come down in the near future, so some may prefer a fixed-term account instead.
Locking money away for a year gives savers a 5.00% fixed rate with Israel’s Mizrahi Tefahot Bank; this account can be opened via the Raisin platform.
Longer periods offer lower rates, with a two-year fixed-term deposit at Isbank yielding 4.70% and Birmingham Bank’s three-year account offering 4.53%.
If savers want to use the ISA wrapper, rates are lower, but the returns come tax-free.
Here, the best available rate is 5.10%, paid daily by Trading 212’s easy-access account. Punjab National Bank follows, with 4.80% from its one-year fixed rate cash ISA.
Those who can afford to lock up their money for longer (at least five years) should consider investing rather than keeping their money in cash, according to Jobson. The stock market has the potential to achieve returns that outstrip both savings rates and inflation, he explained.
This is particularly relevant as Britons have allocated significant amounts of money to cash reserves in recent years, with the latest HMRC data showing that £41.6bn was held in cash ISAs in 2022/2023 – £10.7bn more than the previous 12 months.
At the same time, investments in stocks and shares ISAs decreased by £6.2bn to £28bn. Jobson described this as a “seismic shift” in savings and investment habits during significant economic upheaval.
“The cost-of-living crisis, following the pandemic during which many people experienced a loss of income, underscores the importance of maintaining a rainy-day fund to tide you over when times are tough financially. Three to six months’ salary is a good rule of thumb,” he said.
“However, when it comes to long-term wealth generation, stocks and shares ISAs reign supreme, with history showing that equities tend to outperform cash savings in terms of returns, benefiting from the power of compounding and the growth of the underlying investments.”