Savings rates are rising rapidly and have reached levels not seen in many years.
The best easy access savings rate has breached 2 per cent – a 2.1 per cent deal from Al Rayan Bank – and the top one-year fixed rate from BLME now pays 3.4 per cent.
Chances are that you may not have heard of either of these two banks, but they are fully FSCS protected, so savings up to £85,000 are covered by the compensation scheme.
A name you will have heard of has made a surprise appearance in the top cash Isa rates tables though, Santander pays 1.85 per cent on its easy access tax-free account.
Savings rates are rising fast and our alerts can let you know about the top deals as they land
It’s possible by the time you read this that there are new contenders at the top of This is Money’s independent best buy savings tables; compared to the dearth of decent deals on offer over recent years, new top rates are coming in thick and fast.
That’s why we have set up our new savings alert email service, where you can sign up to get stories on the best new savings deals as they land, sent straight to your inbox.
It’s free and we promise not to send you any junk, just stories about our pick of the best savings deals to help you earn more interest.
But the savings alert emails are separate to our newsletter, so make sure you sign up to savings alerts using our sign-up box here.
The rise in savings rates is the silver lining to the many dark economic clouds right now – and while rising interest rates are not good news for those with mortgages, savers having been waiting a long time for them to go up.
The problem is, of course, that despite the top fixed rates knocking on the door of 4 per cent – BLME’s five-year fix pays 3.75 per cent – they come nowhere close to matching inflation.
That dipped out of double digits to 9.9 per cent in August, CPI data from the ONS revealed yesterday, but is still way above the return you can safely get on your cash.
In theory, savers were better off early last year when inflation was 0.7 per cent and the best savings rates just about matched that. This meant that they were losing less to inflation eroding their money’s spending power.
Nonetheless, it’s far easier to get excited when rates are going up rapidly and the best easy access savings deals don’t start with a 0. – and that is good news because it’s more important than it has been for many years to move your savings to the best possible deal.
You want to narrow that gap between your savings rate and the inflation rate as much as possible, and our savings correspondent Ed Magnus’s regularly updated guide to the best inflation-fighting savings accounts is your friend here.
There is a caveat, however, in that chasing the highest possible rate means fixing for five years and that may not be worthwhile, as the gap between a one and five-year fix isn’t that great – a mere 0.35 per cent on the rate.
With interest rates forecast to keep going up it may pay to give yourself options, as you don’t want to lock away a big sum only to find out that in six months’ time it looks like you did so too cheaply.
Ed tackled the question of what to do in this situation and savings FOMO with his article Should you wait for savings rates to rise or lock your money away?
It’s certainly worth asking yourself whether if you have money that you can lock away for five years you should consider investing it instead. That’s a question we tackle here in: As rates rise is it better to save or invest?
Hopefully, the expensive energy price guarantee cap manages to keep a lid on inflation and it doesn’t get much worse from here. Fingers crossed, it even surprises us all and keeps falling.
One final thing to consider is whether it is worth signing up to a savings platform, these services, such as Raisin, Hargreaves Lansdown Active Saving and Flagstone, let you manage your money across different accounts in one place.
You won’t get the full range of deals that make up the best buys in our whole of market savings tables, but you will get a selection that challenge the top rates and sometimes beat them.
You’ll also probably be less likely to fall victim to inertia and allow your savings pots to fall onto legacy rates, because you can easily see them and move them about in one place.
And it’s inertia that can be the real killer when it comes to savings returns, as repeated studies showing the number of us who allow money to slide onto 0.1 per cent paying insult accounts shows.
So make sure your savings are on the best rate – and sign up for those savings alerts.