More than two million savings accounts set to mature in the next two months – here’s where you can get the best rates
MILLIONS of savers are set to lose their current rates of interest before the end of the year – and are being urged to check for the best deals available.
Over £73billion in savings is currently locked in fixed term savings accounts, which mature in the next two months, according to the Current Account and Savings Database (CSDB).
These savings accounts allow you to deposit a lump sum for a set period.
During this period, you cannot access the funds, but you earn a fixed interest rate.
As many as 2.2million accounts, including over 1.2m fixed ISAs and more than 900,000 fixed term bonds are due to expire before the end of the year.
When these accounts reach maturity, they stop accruing interest.
To secure returns of up to 5% on their deposits, savers must plan ahead and get ready to transfer their funds to a new account.
Last month, and for the first time since January, the average interest rates for both fixed-term and easy access savings accounts declined across the board.
And this trend is continuing.
Only a single bank now offers over 5% back on deposits in its fixed term savings account.
Caitlyn Eastell, spokesperson at Moneyfactscompare.co.uk, said: “Savers who were unable to snap up a shorter-term fixed rate that paid just above the 5% mark may be disheartened to see that they have disappeared almost entirely for the first time this year.”
“Savers who are eager to lock into a guaranteed rate should do so swiftly before they face another plunge.”
The BoE rate influences the rates on borrowing and savings offered by high street banks.
If forecasts are correct, the base rate could fall to 4.75% by the end of 2024.
That’s bad news for savers, whose rates typically fall when the Bank’s rate is cut.
However, several savings accounts still offer the option to lock away your money with the promise of a fixed interest rate for a set period, with rates remaining close to 5%.
Fixed rate bonds can be a useful bet to help ride out future cuts to the base rate.
If you can’t afford to lock away your cash, other account options offer competitive rates.
Adam Thrower, head of savings at Shawbrook Bank, said: “Every saver is different.
“Some might have a large amount of savings; others might want to use an account for a rainy-day fund.
“Whatever you are saving for, or however much you are saving, choosing the right account is key.”
SAVING ACCOUNT TYPES
THERE are four types of savings accounts fixed, notice, easy access, and regular savers.
Separately, there are ISAs or individual savings accounts which allow individuals to save up to £20,000 a year tax-free.
But we’ve rounded up the main types of conventional savings accounts below.
FIXED-RATE
A fixed-rate savings account or fixed-rate bond offers some of the highest interest rates but comes at the cost of being unable to withdraw your cash within the agreed term.
This means that your money is locked in, so even if interest rates increase you are unable to move your money and switch to a better account.
Some providers give the option to withdraw, but it comes with a hefty fee.
NOTICE
Notice accounts offer slightly lower rates in exchange for more flexibility when accessing your cash.
These accounts don’t lock your cash away for as long as a typical fixed bond account.
You’ll need to give advance notice to your bank – up to 180 days in some cases – before you can make a withdrawal or you’ll lose the interest.
EASY-ACCESS
An easy-access account does what it says on the tin and usually allows unlimited cash withdrawals.
These accounts tend to offer lower returns, but they are a good option if you want the freedom to move your money without being charged a penalty fee.
REGULAR SAVER
These accounts pay some of the best returns as long as you pay in a set amount each month.
You’ll usually need to hold a current account with providers to access the best rates.
However, if you have a lot of money to save, these accounts often come with monthly deposit limits.
What interest rates are on offer?
The best fixed rate currently offered is Al Rayan Bank’s one year fixed bond, which pays 5.05% (but requires a minimum investment of £20,000).
Depositing £20,000 in this account would yield £1,010 in interest over 12 months.
If you have a smaller amount to deposit, Union Bank of India’s one-year fixed bond offers a 4.95% return on savings over £1,000.
The best notice accounts are actually offering slightly higher rates than the best fixed-term bonds.
These also come with more flexibility when accessing your cash.
Plum’s 95 day notice account offers savers 5.20% back with a no minimum deposit, for example.
The Bank of London and The Middle East’s 90 day notice account offers savers 5.15% back with a minimum £10,000 deposit.
If you’re looking for a savings account without withdrawal limitations, then you’ll want to opt for an easy-access saver.
These do what they say on the tin and usually allow for unlimited cash withdrawals.
The best easy-access savings account available is from Ulster Bank, which pays 5.2% – but you need to pay in a minimum of £5,000 and also be a current account customer.
Cahoot’s Easy Access account offers a 5% interest rate, allows savers up to three withdrawals a year and requires just a £1 minimum deposit to open the account.
If you want to build a habit of saving a set amount of money each month, a regular savings account could pay you dividends.
Principality Building Society’s Six Month Regular Saver offers 8% interest on savings.
It allows customers to save between £1 and £200 a month. Save in the maximum, and you’ll earn 27.53 in interest.
While regular savings accounts look attractive due to the high interest rates on offer, they are not right for all savers.
You can’t use a regular savings account to earn interest on a lump sum.
The amount you can save into the account each month will be limited, typically to somewhere between £200 and £500.
Therefore, if you have more to save, it would be wise to consider one of the other accounts mentioned above.
FINDING THE BEST SAVINGS RATES
WITH your current savings rates in mind, don't waste time looking at individual banking sites to compare rates - it'll take you an eternity.
Research price comparison websites such as MoneyFactsCompare.co.uk and MoneySupermarket.
These will help you save you time and show you the best rates available.
They also let you tailor your searches to an account type that suits you.
As a benchmark, you’ll want to consider any account that currently pays more interest than the current level of inflation – 2%.
It’s always wise to have some money stashed inside an easy-access savings account to ensure you have quick access to cash to deal with any emergencies like a boiler repair, for example.
If you’re saving for a long-term goal, then consider locking some of your savings inside a fixed bond, as these usually come with the highest savings rates.