Savings Accounts

Savers urged to act now to make money on cash pot for first time in 16 YEARS

Now is the time to make the most of your savings before interest rates begin to fall, experts have warned.

Analysts expect the Bank of England to start cutting interest rates as early as August as the UK claws its way out of high inflation.

But for now, savings interest rates are higher than inflation for the first time since 2008, with investors able to make more than 5% with some accounts.

UK inflation and interest rates

Prices in the UK rose by 2% in the year to May 2024 meaning the Bank has finally hit its inflation target for the first time since late 2021.

Interest rates were held at 5.25% in June but if inflation remains steady the Bank should start reducing the base rate from its 16-year high.

Savers are therefore being urged to lock in a strong fixed rate that beats inflation before they start falling.

UK inflation - what happened?

Inflation peaked in October 2022 when it hit 11.1%.

That was the highest rate for 40 years and was driven by the soaring cost of energy and food.

Like many similar countries, the Bank of England has an inflation target of 2% which ensures the economy is growing but prices are rising gradually and predictably.

Repeated months with lower inflation puts the UK at the risk of deflation which could signal a recession and cause higher unemployment.

Mark Hicks, a savings expert at investment firm Hargreaves Lansdown, told the Guardian: “This is a window of opportunity for savers, so now is the time to clamber in and grab a decent rate before it closes.”

The urgency comes down to the fact that when interest rates are higher than inflation, savers can make more on their money.

When interest rates are lower than inflation, which they have been since 2008, savings are actually losing value in real terms. That's because they're not growing as much as inflation is, so money is worth less even if it's in a savings account. Essentially, you can buy less with it.

Best savings accounts

NimbleFins' Best Savings Accounts Guide shows you can get 5.22% for one year with My Community Bank. You can get the same rate for six months with Oxbury Bank.

Alternatively, you can lock your money away for five years for 4.55% with GB Bank at Raisin.

The guide also shows First Direct is offering its customers 7% for a year on its regular savings account but it has a maximum monthly deposit of £300.

Nationwide is offering its customers an exclusive bond at 5.5% for 18 months.

Two year fixed rate

With one-year fixed rates savers will need to try and find another competitive rate in just 12 months, so some are looking to tie their money up for longer.

Vanquis Bank, Cynergy Bank and Close Brothers Savings are all offering 5.06% for two years with Vanquis and Cynergy requiring a £1,000 minimum deposit and Close needing £10,000.

When will interest rates go down?

The Bank of England will be watching inflation and GDP figures closely before making a decision on interest rates.

Most economists predict they will start to fall in autumn.

The International Monetary Fund (IMF) recommended UK interest rates should fall to 3.5% by the end of 2025.

As of July 1 2024, the base rate is at 5.25%.

The inflation figures for June will be announced on July 17 and have a big bearing on how the Bank sees the economy is performing and will perform in the near future.

The next decision on interest rates will be announced on August 1.

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Helen Barnett

Helen is a journalist, editor and copywriter with 15 years' experience writing across print and digital publications. She previously edited the Daily Express website and has won awards as a reporter. Read more here.