‘Lock in a top savings rate now’ warn experts as best accounts are axed

SAVERS looking for a top rate are being encouraged to act quickly following September’s inflation reading of 1.7%.

Interest rates, especially those over 5% have been hard to come by since the Bank of England cut rates back in August.

A fixed-rate savings account is a savings account that locks away your money for a set period of time in exchange for a guaranteed interest rate.

It’s different to an easy-access account which lets you get hold of your cash immediately.

And now it is predicted that September’s rate of inflation could prompt the central bank to slash rates further.

Rachel Springall, finance expert at MoneyFactsDaily, said savers may wish to “act quickly”.

She explained: “Those looking for guaranteed return may wish to act quickly to grab a top rate as there are expectations for interest rates to come down over the next couple of months.”

“Savers need to prepare themselves for interest rate cuts, so if fixed-rate bond or fixed Cash ISA rates plummet, savers may wish to choose a longer-term deal to secure a competitive rate for the next few years.”

What’s on offer

There are only a few fixed deals on the market offering interest of 5%.

Two of the 5% deals are one-year fixes from the Union Bank of India.

The first offers 5% interest on a minimum investment of £1,000 while the other offers the same on a minimum investment of £5,000. 

The third is from Conister Bank which also offers 5% interest on a minimum investment of £5,000 over one year. 

There are a number of different savings accounts, but the fixed type often offers the most bang for your buck if you are looking to save money over a long period of time.

That is because if you fixed before a base rate cut your rate would stay the same.

Other examples include notice accounts which 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.

There are also regular savings accounts and easy-access accounts, which give you quick access to your money at a lower return.

If you are looking to save and do not need access to your money for a few years then a two-year fix might be for you.

The best deal is from Market Harborough Building Society which offers 4.61 interest over a two year period.

However, you will have to invest a minimum of £10,000. Interest on this deal is paid yearly.

If you are looking to stow away your money for away for longer, a three-year fix could also be an option.

The more competitive option on the market for a three-year fix is by Pricipitailty Building Society.

It is offering 5% interest on a minimum of £500. With this type of account, the interest is paid on the anniversary of when you opened your account.

Four-year fixes operate just like all other fixed accounts, the only difference is you are kept away from your savings for longer.

Pricipitailty Building Society again has the best offer for four-year fixed deals.

The bank is offering 5% interest on a minimum investment of £500.

A cash ISA is a type of savings account that offers tax-free interest on your money.

This means you can earn interest on your savings in a bank or building society without paying tax.

Virgin Money has the most competitive fixed one-year ISA.

The bank is offering 4.61% interest and the minimum amount you need to pay in a quid.

If you are looking for a two-year fixed ISA, State Bank of India is offering interest of 4.50% but the minimum you need to invest is £1,000.

If you are keen on something more long-term, UBL UK is offering customers 4.31% interest if they create a three-year fix ISA.

With a fixed-rate savings account, you lock away your savings for a set amount of time at a set interest rate. 

It’s also known as a fixed-term bond. You may be able to choose how long your savings are locked away for, or it may be an amount of time set by your lender. 

What is going on with interest rates

Experts believe that September’s low rate of inflation could prompt leaders to cut rates again.

This could single the end of attractive deals on fixed savings accounts, an offer which has been slowly dwindling since the initial rate cut back in August.

Alice personal finance analyst at Bestinvest said that “locking in a top rate now” before the best deals disappear could be a “sensible strategy”.

Inflation, which measures how quickly the prices of things increase over time, fell below the Bank of England‘s target for the first time in three years.

It’s important to note that when inflation drops it doesn’t mean that prices have stopped rising, it just means they are doing so at a slower pace.

However, slowing inflation can often be an indication to savers that competitive rates are on their way out.

This is because bosses at the BoE take the rate of inflation into account when deciding whether to raise or hold its base rate.

The BoE raises or lowers its base rate, which dictates what interest rates are charged to banks, in order to control inflation.

Raising, it is supposed to make the cost of borrowing more expensive and control spending, therefore driving down inflation.

The BoE started raising its base rate in December 2021 as the UK economy emerged from the coronavirus pandemic.

But the BoE cut rates from 5.25% to 5% in August, marking the first cut since 2020 in a boon for borrowers.

How you can find the best savings rates

If you are trying to find the best savings rate there are websites you can use that can show you the best rates available.

Doing some research on websites such as MoneyFacts and price comparison sites including Compare the Market and Go Compare will quickly show you what’s out there.

These websites let you tailor your searches to an account type that suits you.

There are three types of savings accounts fixed, easy access, and regular savers.

A fixed-rate savings account 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.

An easy-access account does what it says on the tin and usually allows unlimited cash withdrawals.

These accounts do tend to come with lower returns but are a good option if you want the freedom to move your money without being charged a penalty fee.

Lastly is a regular saver account, these accounts generate decent returns but only on the basis that you pay a set amount in each month.

How do I switch my bank account?

Switching bank accounts is a simple process and can usually be done through the Current Account Switching Service (CASS).

Many high street banks and building societies are signed up and there is a full list on the CASS’ website.

All the hard work is done for you, so you do not have to worry about remembering to switch all of your direct debits.

You simply need to apply for the new account you want to open and the new bank will tell your existing one that you are moving.

Before switching there are a few things that you should do, such as choosing a switch date and transferring old bank statements to the new account.

When you are switching be sure to read all of the terms and conditions of the new account to make sure it meets your needs.

Also factor in what other perks might come with opening up the account, such as the savings rates we previously mentioned.