Earlier this month, inflation in the UK remained at 4%. Financial professionals are recommending high yield accounts so that savers can at least keep pace with inflation as the cost of living rises. Most forecasts are for inflation to return to about 2% over the next few years. This high-rate environment offers an important opportunity for savers to get locked in to advantageous interest rates before the economic dynamic shifts.
Anna Bowes, co-founder of Savings Champion, says swift action could not be overstated. She noted that things are going to be tough for savers in the interim. Everyone who takes advantage of the leading fixed-rate accounts today will have plenty to gain tomorrow. “In a couple of years you might be laughing – especially if inflation has dropped to 2%,” Bowes remarked.
As it stands, the top fixed-rate accounts have come down to more competitive territory, especially in the shorter-term ranks. Smartsave provide an excellent 5.21% fixed interest rate on a one-year bond. This flexibility makes it a great tool for any investor looking to capture greater yields. Cahoot provides a solid choice for flexibly-minded savers. They offer a very attractive 5.2% on their Sunny Day Saver offering, which has no minimum balance to open.
Vanquis Bank’s 90-day notice account gives a whopping 5.4% interest rate for higher deposits. You can get this rate on savings from £10,000. SmartSave’s online account further accommodates deposits of £10,000 up to £85,000, needing just an opening deposit of £1,000. Savers should be aware that withdrawing from this account requires a notice of withdrawal of at least 90 days.
Rachel Springall, from financial information company Moneyfacts noted that 90 providers have increased returns on easy-access and fixed-rate accounts. This reversal marks the second time in six months that the base rate has been raised. She states, “Providers are more likely to change their variable rates in reaction to movements among their peers, and to manage the flow of deposits.” What this means for savers Because bank competition creates a race for higher rates, it’s essential for savers to be tuned in to the trends in the market.
During the start of 2023, Springall points out, average high easy access rates are competing with some shorter-term fixed-rate bonds. These rates are subject to sharp and unforeseen increases. “So, despite many of the top easy access rates sitting on a par with some shorter-term fixed-rate bonds, these can change without much notice,” she explained.
In terms of ongoing contributions, the annual Individual Savings Account (Isa) allowance is central to savings. It enables you to save up to £20,000 tax-free in one year. Economists are now forecasting that the Bank of England will hike rates in the spring to encourage economic activity. Prospective savers will need to make informed decisions under the shadow of this possible new directive.
Springall and Bowes both stressed that competition will be the most important factor in shaping future interest rates. “Any future improvements to the top rates will be down to competition,” Springall noted.