Savings rates continue to defy gravity

Savings rates are proving resilient!

Last month, on February 6th, we saw a 0.25% cut to the Bank of England base rate.

Normally, that’s bad news for savers since interest rates on savings accounts tend to follow suit. But so far this year, the best savings rates have held up surprisingly well. In fact, many accounts are not only offering rates higher than the current base rate of 4.50% but also keeping pace with the rising cost of living (inflation), which currently stands at 3%.

Arrange your free initial consultation

So what does this mean for savers?

Well, it might not be as bad as you think!

The fact is that some of the longer-term bonds and ISAs are actually paying higher rates now, compared to the beginning of the year.

Back in early January, the best 5-year bond available paid 4.50% AER, but today, JN Bank, Birmingham Bank and Close Brothers Savings are all offering 4.55% AER. Similarly, the top 5-year cash ISA rate has risen from 4.18% at the start of the year to 4.30% now.

One of the key reasons for this is inflation, which remains stubbornly above the Bank of England’s 2% target. As a result, interest rates are expected to stay higher for longer than previously anticipated. Good news for savers!

Even some of the top variable rates, whilst a little lower than they were in January have not fallen by as much as the cut in the base rate. At the start of the year the best unrestricted easy access account, offered by Gatehouse Bank, paid 4.75%. Today, GB Bank is offering 4.60% AER. And that Gatehouse Bank account, although it has since been withdrawn from sale, those who opened it before it was closed are still benefiting from that 4.75% rate.

For those who can limit their withdrawals, even better rates are available. Monument Bank’s Limited Access Saver pays 4.75% AER, allowing three penalty-free withdrawals per year—though you’ll need at least £25,000 to open the account. If you have a smaller balance, Vida Savings Defined Access Issue 1 offers 4.65% AER, allowing four penalty-free withdrawals a year. Any additional withdrawals will see the rate drop to 2.50% for the rest of the year.

Cash ISAs continue to provide a valuable tax-free savings option. There’s been speculation that the cash ISA allowance could be reduced—or even scrapped altogether. However, despite the ongoing debate, it has been reported that Chancellor Rachel Reeves has confirmed there will be no changes to cash ISA rules in the upcoming Spring Forecast on March 26th – but that doesn’t mean the cash ISA allowance is safe!

The key takeaway? Savers still have plenty of opportunities to make their money work harder. It’s worth checking what you’re currently earning and switching if you can get a better deal. And if you can afford to lock away some of your savings, you could protect yourself from further rate cuts while keeping up with inflation.

Take a look at our unbiased and whole of market best buy tables to see if you could do better!

Arrange your free initial consultation

Investment returns are not guaranteed, and you may get back less than you originally invested. This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. The Financial Conduct Authority (FCA) does not regulate tax advice.