It’s been a year since savers flooded their cash into fixed-term savings. From July to September 2022, £7.9 billion was moved into fixed-rate bonds. From October to December, that figure exploded to £30.8 billion.
Most were fixed for just a year which means a wall of maturity, billions of pounds high, will be flooding back into the savings market over the coming months.
This article isn’t personal advice. If you’re not sure if something is right for you, seek advice.
How much interest could savers earn?
Last October, the best one-year fixed rates were around 4.45%.
Since then, the Bank of England (BoE) has raised the base interest rate another 2.25%. You can still find one-year fixes around 6%, and that’s despite the BoE recently putting a pause on further rate rises.
But with the BoE putting the brakes on, we think savings rates are likely to settle. If rate expectations remain low, fixed savings rates will drop.
Although if your fixed rate is maturing in a few months, it’s not time to panic.
Sticky inflation means the base interest rate could be held high for a while. And providers looking to claim the maturing cash over the coming months will still compete. So, we’re not likely to see a dramatic savings rate drop in the near future.
It means that even if you’re not able to get the best rates right now, you could still get a better rate on your money than you did last year.
Why so many could miss out
In many cases, when your fixed rate comes to an end, cash will roll over into a far less rewarding easy-access account. If you save with a high street bank, that will currently offer around 2%.
Alternatively, cash will go back into the current account you paid from. Earning even less interest.
Current accounts are costing us billions – get more from your savings
If all maturing money found itself in one of these lower rates, instead of going into top fixed rates of 6%, we could miss out on just over a billion in interest.
What can you do about it?
It could pay to check when your fixed term is maturing – and making a note to act quickly when it does.
There are great fixed rates available right now, and you might want to lock one of them in while they last. Just remember you usually can’t withdraw from fixed-rate products until the term ends. Inflation also reduces the future spending power of your money.
If you don’t want to lock your money away, or you want more time to decide, the best easy-access accounts are over 5%.
That’s still a higher rate than the top one-year fixes last year. Although bear in mind that easy-access rates can change at any time.
Keep it simple
One way to make this more straightforward is to use a savings platform, like Active Savings.
You can access products from multiple banks and building societies through one online account. That means keeping an eye on all your savings in one place. When the time comes, you can switch to another rate with a different bank in minutes, without opening a new account.
Plus, if you don’t want to decide straight away, you can choose an easy-access product for your money to automatically roll into. That means you can keep earning interest, without logging in again.
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The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money. Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).