Martin Lewis has urged savers to check the interest rates on their accounts after fixed savings deals climbed to their highest levels in three years. The consumer champion highlighted a range of accounts offering returns above five per cent in the latest weekly newsletter, including fixed rate bonds, easy access accounts and cash ISAs.
Rates rise ahead of Bank of England decision
The update comes ahead of the Bank of England's next interest rate decision on November 5, with MoneySavingExpert (MSE.com) reporting that fixed savings rates have already increased in anticipation of potential changes to borrowing costs.
Writing in the latest MSE newsletter, Martin said: "Before the great MSE team take you through the top deals, it's worth understanding that the next 10 days are big ones in the money world."
He explained that financial markets have already priced in further increases to the Bank of England base rate, which currently stands at 3.75 per cent.
Martin said: "Fixed savings rates, however, depend on the market's view of future interest rates. And the market - by which I mean swap rates (the City's view of the future cost of funding) - has already priced in four base rate rises over the next year, so up to 4.75%. That's why we've already seen fixed savings rates increase to their highest in 3yrs."
However, he cautioned that fixed savings deals may not necessarily continue improving if interest rate expectations change.
Top fixed and easy access deals
MSE reports that the highest fixed savings accounts are now offering returns of up to 5.4 per cent, while some easy access accounts are paying up to five per cent. The newsletter advises people with easy access savings accounts paying less than four per cent to consider switching to a better paying deal.
According to the latest MSE newsletter, some of the leading fixed rate savings accounts include:
- One year: Afin Bank at 5.15% and Chetwood Bank at 5.13%, both requiring a minimum £1,000 deposit
- Two years: Chetwood Bank at 5.25% with a £1,000 minimum deposit, and OakNorth Bank at 5.21% with a £1 minimum deposit
- Three years: Chetwood Bank at 5.25% with a minimum £1,000 deposit
- Five years: GB Bank at 5.37% with a minimum £1,000 deposit
MSE also highlights National Savings and Investments (NS&I) British Savings Bonds, which offer fixed rates of 4.99 per cent for one year, 5.07 per cent for two years, 5.1 per cent for three years and 5.17 per cent for five years.
Unlike variable rate savings accounts, fixed rate products guarantee the interest rate for an agreed period. However, most require customers to leave their money untouched until the account matures.
Easy access and cash ISA options
People who need access to their savings may prefer a variable rate account, although the interest paid can change. MSE highlights several competitive deals, including:
- Cahoot Sunny Day Saver: 5% on balances up to £3,000
- Oxbury Bank: 4.57% for new customers
- Zopa: 4.56%, although the rate falls if customers make more than three withdrawals in a year
- Monument Bank: 4.56%, with a minimum £25,000 deposit
- Chase: 4.5%, including a one year introductory bonus
The newsletter also highlights cash ISAs offering up to 4.87 per cent on easy access savings, with interest protected from Income Tax.
MSE advises savers to check the terms of any account carefully, particularly where advertised rates include temporary bonuses or restrictions on withdrawals.
Should savers fix their rates now?
Martin said that although a rise in the Bank of England base rate could benefit people with variable rate savings accounts, fixed rate deals might move in the opposite direction.
He said: "So a base rate rise is likely to see easy-access rates rise more than fixed rates."
He added: "This means that for those who are constantly focused on the best rates, fixes look decent right now, though they could always rise a tad higher if the Nov base rate rise happens as predicted."
The MSE newsletter also highlights that some people may be earning considerably less interest than they could simply because they have not reviewed their existing savings accounts.
Martin said: "Yet in truth, many people reading this who have savings will have pants accounts anyway, paying far less - at which point, forget playing at the edges, just ditch and switch to the deals below to boost what you earn!"
Savers considering switching should check whether their existing account has any withdrawal restrictions or penalties, and whether a new account offers the flexibility they need. The full list of current savings rates and account conditions is available on MoneySavingExpert.com.
