How to move your savings to a better rate

Before December gets a hold of you – the socialising, gift-buying, last-minute Christmas rush and then the ‘aagh it’s here’ moment – give yourself a present: move your savings to a better account.

That doesn’t sound like a lot of fun – or particularly festive – but I reckon you’ve got just under a week to do it, or Christmas will start to derail you.

And you might find that after Christmas rates don’t look quite as good as they do now.

We are in the curious position where although the Bank of England is forecast to keep raising base rate, it looks as if savings and mortgage rates may have already peaked.

This comes after rates rocketed in the wake of Kwasi Kwarteng’s ill-fated mini-Budget, which dished out debt-funded tax cuts with reckless abandon, and sparked a mini-financial crisis for Britain, triggered by esoteric pension investments and UK government bonds.

As we know, that story ended with Kwarteng and his boss Liz Truss out, Jeremy Hunt and Rishi Sunak in, and tax cuts reversed in favour of tax hikes in the Autumn Statement.

A degree of restored stability and confidence has dampened expectations of how high yields on gilts, as UK bonds are known, and the Bank of England base rate will have to go.

A such, it looks like mortgage and savings rates may have run well ahead of things – and in recent weeks they have been coming down.

This is good news for homeowners staring down the barrel of 6 per cent-plus mortgage rates but bad news for savers.

It’s worth noting that with CPI inflation at 11.1 per cent, there is no chance you will beat this with a savings account.

But that doesn’t mean you shouldn’t try to get the gap as narrow as possible, and as some number-crunching from our savings expert Ed Magnus shows, a two-year fixed rate now could beat future inflation, if it falls as expected.

That’s a big ‘if’, but even if you think the Bank of England, Office for Budget Responsibility, and government aren’t likely to have got much better than absolutely useless at forecasting inflation, you should still move your savings.

Savings rates are far higher than they were a year ago – and considerably above earlier this year.

A year ago, the best easy access deal paid about 0.75 per cent, today it pays 2.81 per cent. Meanwhile, the best two-year fix paid about 1.6 per cent a year ago and today stands at 4.75 per cent.

If you’ve got money in a legacy bank or building society account, you are likely to be earning much less than this. The worse case scenario is you are in what we call ‘insult accounts’, the old savings deals that pay such a pitiful rate that it’s an insult to even offer it.

When it comes to moving your savings there are some important things to think about, I’ve listed them below along with links to our independent best buy tables.

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Do you need easy access to savings?

If you need to be able to get at your savings straight away, for example a rainy day fund, then make sure the pot is in an easy access account. Some allow a limited number of withdrawals a year, others genuine easy access with no limits. You will sacrifice some interest for the convenience, but this might be necessary. Check our easy access savings tables.

Do you want to fix your savings rate?

Fixed rates are better than easy access and come in a variety of lengths, often one-year, two-year, three-year and five-year, but other durations too. With most you are committing to locking your money away for that long and can’t get at it. Be aware that if rates go up in future, you could be locked into a deal on a lower rate. And remember, it’s not all or nothing, you could opt for some easy access and some different duration fixes. Check our fixed rate savings tables.

Should you use a cash Isa?

Cash Isas keep all your interest safe from tax, which otherwise eats into returns at a rate of 20 per cent, 40 per cent, or even 45 per cent. The personal savings allowance protects the first £1,000 of interest from tax, but only for basic rate taxpayers. Higher rate taxpayers have just £500 and additional rate taxpayers don’t get anything. With rates rising and fiscal drag bumping up people’s tax brackets, more are being pulled into the savings tax net. Check our cash Isa tables.

Should you use a savings platform?

One of the greatest risks for poor returns on your savings is losing track of old accounts spread across different banks and building societies. Savings platforms get round that by allowing you to manage your money in one place. They don’t offer all the deals available but do feature rates that are in or around the best on the market. Check our savings platform tables.