
Before switching to a fixed-rate account, some savers are holding out for savings rates to increase
But you might have to pay hundreds for this.
Predicting whether savings rates will increase or decrease this year can be difficult.
A decision was made earlier this month by the Bank of England to maintain the base rate at 4 points 25 percent. In the meantime, while some savings rates have decreased, others have increased slightly.
A variety of "push-me-pull-you" factors operate behind the scenes, determining the next course of action for the bank and savings providers. One option is for the Bank to lower interest rates in an effort to spur economic expansion.
However, bond yields have an impact on banks and building societies as well; savings rates rise in tandem with bond yields, as they did recently.
It's uncertain how the UK economy will perform this year and what direction savings rates may move if you include the Trump tariffs and geopolitical tensions, like those between Israel and Iran.
The uncertainty surrounding savings rates, according to Sarah Coles, head of personal finance at Hargreaves Lansdown, runs the risk of "sparking a wave of wait-and-see savers."
According to her, savers may lose 624 in interest if they wait to transfer their funds to a fixed-rate account.
Additionally, savers should be on the lookout for extremely low rates from the largest banks in the UK and be ready to switch.
The top five banks, Barclays, HSBC, Lloyds Bank, NatWest, and Santander, are paying less than 1 percent on their most flexible easy-access savings accounts, according to a Moneyfactscompare . co . uk examination. The best rates available on the market are 4 points 5 percent, while the market average is 2 points 74%.
Additionally, according to the comparison website, devoted savers have had to put up with three years of subpar interest rates on accounts that were closed to new users, proving that switching to a new savings account is worthwhile.
According to a survey conducted by Hargreaves Lansdown, over half of respondents (55 percent) do not anticipate changing their savings in the upcoming year, with one in ten stating that they are waiting for savings rates to increase.
"Unfortunately, this strategy has serious flaws. Coles remarks that there is a genuine cost to waiting in addition to the lack of assurance that savings rates will increase.
The "wait and see" approach to saving money.
Coles claims that some customers will simply "wait and see" before transferring their funds to an account with a respectable interest rate due to the current status of the savings market and global events.
"We can anticipate a decline in savings rates over time based on certain indications. In April, the UK economy shrank by 0.3 percent, according to GDP figures, and unemployment reached its highest level in four years. The Bank of England may lower interest rates in this climate because it is more focused on economic expansion than inflation risks, she says.
Bond yields have been varying, though, as bond investors have been responding to President Trump's tax bill and Moody's downgrading of the US credit rating. Savings rates increase whenever these do because they are used to price savings accounts in the swaps market. This explains why some rates increased last week.
"They're often making less than half the best easy-access rate on the market and far less than a decent fixed rate," Coles cautions, pointing out that most savers have their money in easy-access accounts with high-street giants.
Despite the possibility of future increases in fixed savings rates, she contends that if you are content to commit your funds for a year, it is better to do so now.
Coles provides the following illustration. You will receive 158 in interest over the course of six months if you have 30,000 in an easy-access account earning 1.05% and you watch what happens. After 18 months, you will have 31,700 if the market's best fixed rate increases from 4 percent to 5 percent and you fix for a year. In the event that the market's best rate drops to 4 percent, you will have 31,387.
In contrast, if you fix now at 4 percent, you will have 31,378 after a year. After that, you could earn 4 percent for six months and total 32,011 if you moved to a competitive easy-access rate. If you manage to get a 5 percent easy-access rate, you would end up with 32,171.
"It implies that by fixing now, you might be 471 better off if rates drop in six months. Fixing now could actually make you 624 more money if they rise in six months. In these situations, fixing now at the best rate is always preferable to holding onto money in a dreary high-street savings account, regardless of rate changes, Coles says.
It may be comparable to homeowners who anticipate remaining on a variable-rate mortgage and switching to a fixed one when interest rates continue to decline. Even if fixed mortgage rates decline later, it might be more cost-effective to move to a fixed rate now if the variable mortgage is pricey.
Switch to a better account if you find that customer loyalty isn't paying.
Savers should be cautious not to make the mistake of assuming that their customer loyalty will pay off, in addition to the "wait and see" savings error. or that a competitive interest rate will be offered by the large, reputable banks.
Moneyfactscompare reports that the largest difference between the average easy-access "closed" and "live" rate over the last three years (June 2022 to June 2025) occurred in October 2023, when it was 0.66 percent (2.52 percent versus 3.18 percent).
A live account is one that is accessible to new users, whereas a closed account is one that is no longer available to new users.
Due to Consumer Duty regulations, which mandate that financial institutions treat clients fairly, and generally declining savings rates, the average gap has now decreased to 0.05 percent.
However, some banks have larger gaps. For instance, Santanders closed Everyday Saver only pays 1%, while the live account pays 1.2 percent.
In order to obtain the best deals, savers need to be ready to transfer their funds, according to Rachel Springall, the comparison site's finance expert.
"Savers who have been shortchanged for too long have not reviewed and switched from their closed easy-access accounts. The crux of the matter is that savers must move their money proactively.
"Savers who only have small pots might feel there isn't enough incentive to switch," she continues. "But there will also be loyal customers who believe they are getting a fair return on their hard-earned cash." When inflation reduces the real return on savers' hard-earned money, it is especially risky to be indifferent to moving pots.
The most well-known brands aren't the only ones that savers should consider because rival banks and mutual funds are trying much harder to attract deposits.
Right now, 4.55 percent is the best one-year fixed rate offered by Cynergy Bank. The Chase Saver With Boosted Rate, which offers 5% interest, is the greatest easy-access account.
Think about a cash ISA.
The most recent data from the Bank of England shows that savers are still pouring money into cash ISAs, with 3point 9 billion paid into the tax-free accounts in May.
This is less than the 14 billion cash ISA deposits made in the previous month, but April typically sees a significantly higher amount because it is the end and beginning of the tax year.
Because of the uncertainty surrounding the products' future, savers are rushing to use their cash ISAs, and this is a significant amount. Rachel Reeves, the chancellor, has stated her intention to change ISAs in order to attract more investors and strengthen the British economy.
Four and a half billion dollars were deposited into cash ISAs by savers in March.
The easiest way to avoid paying taxes on savings interest is to transfer your funds to a cash ISA. There are two types of ISAs available: fixed-rate and easy-access.
More details about whether you must pay taxes on your savings and how to avoid it can be found in Beware the savings tax trap.
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