Savers should hurry to secure the top savings rates on the market as many of the best deals are being withdrawn.
The returns on savings rates hit the "dizzy heights" of over 6% during 2023 "after decades in the doldrums", said MoneyWeek. But those kinds of rates are disappearing as inflation slows and the Bank of England (BoE) base rate remains frozen at 5.25%.
Savers have seen rates rise to a 15-year high in response to interest rate hikes from the BoE throughout much of 2023. But the days of 6.2% one-year rates are "well and truly over", said This Is Money, since interest rates may have peaked and have been held at 5.25% for four consecutive Monetary Policy Committee monthly meetings.
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Even if rates are falling, it is still worth switching. The Financial Conduct Authority (FCA) warns that while the average savings rate for instant access savings was 1.99%, and 3.52% for fixed rate accounts, in December 2023, there are now accounts paying more than 5%. It has launched a savings calculator to help savers work out how much extra they could earn.
The state of the savings market
Interest rates may have peaked, said Money.co.uk, but "savers can still be rewarded in 2024". Savings rates aren't as high as six months ago, but the "top rates are still beating inflation".
Moneyfacts data shows 953 savings accounts currently beat inflation but while rates have been falling, "the savings market may still see a flurry of activity" as ISA season approaches at the end of the tax year.
Where are the best savings rates?
It is important to look beyond your high street bank for savings rates, said MoneyWeek, as the best deals are currently "mostly from small bank providers and challenger banks".
Cahoot Bank has the highest-paying easy access account as of the end of February at 5.2%, while you can earn 5.26% on a one-year fixed rate with SmartSave or 7% on a regular saver with First Direct.
Go for easy access if you need "instant access" to your cash, said MoneySavingExpert, or you can get higher returns if you are willing to "lock your cash away" for longer. Easy access rates have remained "broadly stable", said The Telegraph. But it may be worth opting for a longer-term rate now before returns fall further.
Many longer-term savings bonds may be paying less than short-term alternatives, said Savings Champion co-founder Anna Bowes on the i news site, but that "makes it clear that the market expects the base rate to fall" so you are "likely to get a better deal overall" if you fix for a long period.
Look beyond fixed-rate savings accounts
Fixed rates are just one type of savings product to consider.
Regular saver accounts are currently offering "some of the best returns" on the market, said Forbes Advisor.
These products let you save a "certain amount" each month, explained The Times Money Mentor, and savers typically earn a "higher interest rate than with a normal savings account".
Currently, regular saver accounts have rates of up to 7% but they may be available only to existing current account customers, and there will be limits on how much you can save and when you can make withdrawals, added the financial website.
Should you invest instead?
Finding the "best possible rate" is a priority for any saver, said Unbiased, but if inflation is higher than the amount of interest you receive, the "real value of your money will reduce".
If you are willing to "tuck your money" away for at least five years, it may be worth investing in the stock market through shares or funds instead, giving your money a "better chance" to grow but this will usually depend on "how long you wish to save or invest for".
However, investment always comes with a level of risk, and investors may get back less than they originally put in, so this must be carefully considered.
