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Interest rate rises paused – what’s next for savings rates?

For the first time in years, the base interest rate is staying the same. Here’s what it means for you, and how to get more from your savings.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Mike Kemp/Contributor via Getty Images

The Bank of England (BoE) has pressed pause on rate rises, meaning they’ll be staying at 5.25% for now.

Rising prices, soaring rates, and a washout summer beset by strikes meant the economy started to shrink. And with unemployment on the rise, and employment and vacancies dropping, it couldn’t risk squeezing too much life out of the economy.

However, this might not be the last of it.

We’re still contending with sticky inflation and red-hot wage rises, so we can’t rule out more rises further down the track. There are also unlikely to be any cuts on the cards in the immediate future.

This article isn’t personal advice. If you’re not sure if something is right for you, seek advice.

What’s next for fixed-rate savings?

Assuming we’re coming to the end of the rate rise cycle, this could be as good as it gets for fixed rate savings. Anyone who’s been waiting for rates to peak before fixing might not want to wait much longer.

The banks don’t just focus on the immediate future when setting fixed savings rates, they look at what’s likely to happen to interest rates during the entire fixed period. The fact this could be the last of the hikes means there’s little incentive for them to put rates up further.

In fact, the very best fixed rates over two and three years are down a little from their July levels. From 6.15% to 6.05% AER in two-year fixes, and from 6.44% to 5.99% AER in three-year fixes.

This is because in the early summer, inflation came in higher than expected, so the banks thought rates would have to stay higher for longer.

In the intervening months, inflation has fallen, so they’ve reined in their expectations and savings rates have eased off very slightly.

The one-year market differs slightly, because the launch of the NS&I bond paying 6.2%. This has encouraged more competition, and several players to push through the 6% barrier. It means the market could inch up from here, but we’re not expecting anything particularly striking.

Savers are already locking in better rates. The BoE figures show £10.1 billion went into fixed rate accounts in July – streets ahead of the monthly average of £5.9 billion over the previous six months.

There are no guarantees

There’s the chance that inflation is stickier than the market currently thinks, so rate expectations could rise – pushing up fixed savings rates.

Whatever you do with your savings, there’s always the chance of being unsettled by a market shock. However, if the worst that happens is you fix your savings for around 6%, then it’s hardly the end of the world. Just remember, you usually can’t withdraw from fixed-term products until the term ends. Inflation will reduce the future spending power of your money.

What about easy-access rates?

The easy access market, meanwhile, is slightly more sensitive to rate rises over rate expectations.

It’s been inching up ever since the BoE started raising rates. The average is now over 3% and the very best at 5%. These might have slightly further to go, but that will depend on the BoE’s next move.

However, if you’re hanging around in an account paying a poor rate, it’s not worth waiting. It pays to switch to a better rate today – you can always switch again later if rates rise much further from here.

Get savings that work for you

When you’re deciding where to save, we think you should be driven primarily by your needs – and how long you want to tie the money up for. In many cases, the right answer is a ‘portfolio’ approach – where you break the cash into chunks depending on when you need it.

Your emergency cash savings of three to six months’ worth of essential expenses needs to be in easy access savings. But the rest can be fixed for the periods that make the most sense. This gets each portion of your cash working hard for the time it needs to.

If you save through a cash savings platform like Active Savings, you can keep an eye on all your savings in one place – which makes multiple products far easier to manage.

You can access a range of easy-access and fixed-term products offered by our banking partners through one online account.

As your needs change, you can switch between consistently competitive products in a few clicks.


NEW – cash bonus available

When savings rates are high – Active Savings can help you take advantage. And you could get a £25 cash bonus if you add £10,000+ to a fixed term of six months or longer.

Act by 29 September. If you need more time to decide you can register for an extension on our website. Terms apply.

Find out more

You can’t usually withdraw your money from fixed-term savings until the term has ended. Before fixing, make sure to have rainy day savings you can access easily for emergencies.

This website is issued by Hargreaves Lansdown Asset Management Limited (company number 1896481), which is authorised and regulated by the Financial Conduct Authority with firm reference 115248.

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).

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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