Interest rate hikes are usually high times for savers and annuity hunters, and today’s 0.5% interest rate rise will certainly bring some great opportunities.
However, this time round it’s not quite so simple. The oddities thrown up by the bond market crash last year mean fixed rate savings might have peaked.
Have savings rates peaked?
Sarah Coles, Senior Personal Finance Analyst
Easy access savers can revel in this good news, because it’s highly likely to mean rates will continue to edge up. They’ve done so for the best part of a year now. And while they’re moving in tiny increments, if you haven’t switched for a while, you could make substantially more by tracking down a competitive deal.
We’re unlikely to see major shifts as a result of the rate change, because a sluggish mortgage market means banks aren’t desperate to attract an awful lot more cash.
Meanwhile, it looks like fixed rate savings might have peaked, and a rate rise isn’t going to change this. The markets were expecting this rise, so it’s already been priced in to the rates they offer. The key is what’s going to happen to rates further ahead.
In the aftermath of the mini-budget, the Bank of England base rate was expected to peak at 6%, but now that’s been scaled back to 4.5. It means banks will be factoring in lower rates in future, so they’re repricing deals and the best on the market have dropped back.
If you’ve been waiting for the right time to fix your savings, you might want to look at what’s on offer now before it’s too late.
Here’s one simple way to find a better rate.
Active Savings gives you access to consistently competitive, often market-leading rates from our bank and building society partners, through one online account. And you can pick and switch your savings in a handful of clicks.
Mix and match fixed term rates that range from a few months to five years, all alongside your emergency easy or limited access cash pot. There’s no limit to the number of products you can choose. Please remember fixed term products generally only allow access to funds at maturity and inflation reduces the spending power of money.
The best rates on Active Savings
Easy access
Up to
5.06% | 4.95%
(AER | Gross)
Avg. market rate
2.73%
1 year
Up to
5.32% | 5.32%
(AER | Gross)
Avg. market rate
5.43%
2 years
Up to
5.10% | 5.10%
(AER | Gross)
Avg. market rate
5.49%
3 years
Up to
4.80% | 4.80%
(AER | Gross)
Avg. market rate
5.21%
Easy access
Up to
5.06% | 4.95%
(AER | Gross)
Avg. market rate
2.73%
1 year
Up to
5.32% | 5.32%
(AER | Gross)
Avg. market rate
5.43%
3 years
Up to
4.80% | 4.80%
(AER | Gross)
Avg. market rate
5.21%
Please note the products above are some of our most popular, but more are available. Click the link above to see our full range. Products can be added or withdrawn at any time. Minimum deposit requirements apply to individual products. Easy access products pay a variable rate and fixed term products pay a fixed rate.
Source: Bank of England 31 October 2023. Comparisons with average market rates for easy access products are based on instant access products, which allow immediate withdrawals. Active Savings offers easy access products and withdrawals usually take one working day.
AER (Annual Equivalent Rate) shows what the interest rate/expected profit rate would be if it was paid and compounded once each year. It helps you compare the rates on different savings products. Once you have opened a fixed term product the rate won't change, but rates on easy access products can vary.
Gross means the rate without any tax removed. Interest/profits are paid gross. You are responsible for paying any tax due on interest/profits that exceed your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change.
The savings of private individuals held with authorised banks and building societies are covered under FSCS. All of our partner banks are authorised by the Prudential Regulation Authority (PRA) and covered under FSCS.
What the interest rate rise means for annuities
Helen Morrissey, Senior Pensions and Retirement Analyst
Annuity rates have fallen back since the dizzy heights reached in the aftermath of the mini-budget. However, they still remain almost 40% higher than the same point last year. Today’s rate rise isn’t guaranteed to push this higher, but it’s a real possibility.
Annuity incomes are determined by the yields on long-term gilts, which providers use to generate returns. The mini-budget pushed yields up significantly, so rates shot up. Higher interest rates also tend to push yields up – so this hike could mean better rates.
At the time of writing, data from our annuity comparison tool shows a 65-year-old with a £100,000 pension could get an income of up to £6,892 a year from a single life level annuity. This compares to £5,004 at the same time last year. Annuities have always offered the security of a guaranteed income in return for a lump sum, and now they’re offering a better income too.
These quotes also assume a five-year guarantee and that income is paid monthly in advance. But bear in mind that income depends on your circumstances, quotes are only guaranteed for a limited time and rates change frequently so they could go up or down in the future. It's also important to consider your options carefully as you can't usually change an annuity once it's set up.
People interested in securing a level of guaranteed income for retirement through an annuity could benefit from going online to see what kind of rates are on offer. Different providers offer different rates, and you could get more if you’re older or have a health condition.
The best deal on offer isn’t always available from the same provider. It’s vital to get a comparison from across the market to make sure you get the best deal.
You can get quotes from all the main annuity providers in the UK using our annuity quote tool.
This article isn't personal advice. If you're not sure what’s right for you please seek personal advice.
If you need help understanding your options at retirement you should seek guidance from Pension Wise, the government’s free impartial service. If you need more help, consider taking financial advice.
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).
