Savers are being urged that switching accounts is an “essential” move now as top interest rates increase month on month.
Successive Bank of England Base Rate rises have sent savings rates soaring to the highest levels seen in decades, but research suggests a significant amount of Britons are not making the most of this advantage.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “There has been a positive uplift in savings rates overall, thanks to competition and back-to-back Bank of England Base Rate rises, but not every consumer may be seeing the benefits.
“Indeed, less than a third of the savings market pays above Base Rate (5.25 percent), and there are even some easy access accounts paying just one percent. It is essential for savers to ditch and switch if their loyalty is not being rewarded.
“The latest top rate deals for savers who only wish to lock their cash away over the shorter-term have improved since the last inflation announcement, and so have easy access accounts.”
Comparing the market-leading easy access savings account on August 16 when the last CPI inflation rate was announced, Cynergy Bank was taking the lead with an AER of 4.8 percent. Today, Paragon Bank storms ahead with a top AER of 5.05 percent
Delving into the top fixed rate interest rates, Moneyfacts said OakNorth Bank was offering the highest AER for one-year fixes at 6.02 percent last month. This month, NS&I tops the list in that category with an AER of 6.2 percent.
Ms Springall said: “Inflation is still eroding savers’ cash in real terms, so it’s imperative they take time to ensure their account is offering a competitive return on their investment.
“If savers want to spread their cash across a flexible account and a fixed bond, then this will allow them to take advantage of higher returns but also retain access to a proportion of their cash in an emergency. However, depending on demand, some market-leading accounts could be pulled from sale, so quickness is key.
“If savers are prepared to give notice to access their cash, then they could find better returns available on notice accounts, which pay over four percent on average. Notice accounts have flourished this year and may be a more suitable choice than a fixed rate bond.”
Ms Springall said ISAs are “not to go unnoticed”, as providers have been particularly active this month with several improvements made across easy access, notice and fixed rates.
Comparing the market-leading easy access ISAs on August 16, Shawbrook Bank was offering the highest rate at 4.43 percent. Today, Moneybox tops the table with an AER of 4.75 percent.
For fixed ISAs, interest rates are hitting as high as 5.8 percent with Virgin Money’s one-year product, whereas last month the highest rate was offered by Santander at three percent.
Ms Springall said: “Those savers who may be concerned about rising interest rates on their Personal Savings Allowance (PSA), may then be pleased to see ISAs improving, as these protect deposits under a tax-free wrapper.
“The PSA has been a useful allowance, but some savers could breach it, so an ISA may be worth considering. There are even deals that apply flexible ISA rules and some providers that allow investors to split their ISA allowance across different options within their product range.
“Splitting out ISAs is a way for savers to take advantage of fixed rates and the more flexible easy access ISA rates.”
Ms Springall added: “Whichever account savers choose, it’s imperative they pick an account that suits their personal circumstances and take note of deals on offer from the more unfamiliar brands.”
