For this week’s Savings Guide, Anna Bowes, savings expert from The Private Office, explains why the era of high interest rates could be coming to an end…
Even though inflation ticked up by more than expected in December, the trajectory for interest rates is still expected to be downward this year.
And when the Bank of England makes cuts to its base rate, so do the banks and building societies to the interest rates offered on our savings.
While economists have almost ruled out a base rate cut at the Bank’s next meeting in February, one is still expected in April.
“The fact that interest rates are expected to fall this year is beginning to feed through to the savings market, as many rates are starting to tumble,” Bowes says.
The average of the top five easy access accounts has fallen from 4.33% at the end of December last year, to 4.24% today, although the top rate on offer is still 4.5% from Chase Bank.
For easy access ISAs, the average of the top five has fallen from 4.25% to 4.22%.
The top rate on offer is lower than it was at the beginning of the year, with Plum and Moneybox both currently offering 4.32%.
It’s not quite as gloomy in the fixed-rate bond tables.
The top 1-year bond has also fallen since the beginning of the year, dropping from 4.45% to 4.3%.
OakNorth, via the Prosper app, launched a 1-year bond paying 4.3%, placing it at the top of the tables after the Marcus by Goldman Sachs 1-year bond at 4.55% was withdrawn yesterday.
The top 2-year bonds have remained pretty static so far this year, with the top rate still paying 4.20%,
And it’s pretty similar in the 3-year table, although the top rate has fallen by the smallest of margins as UBL UK has just withdrawn its bond paying 4.21%, which has left The Access Bank in the top spot paying 4%.
It’s not quite such good news for those looking for a longer term 5-year bond, as the top rate on offer has fallen from 4.31% earlier this year, to 4.27% with HTB, and we’ve seen a little flurry of rate withdrawals – with lower paying replacements.
Shorter term fixed-rate cash ISAs, which had been holding up pretty well in the face of base rate cuts last year, have fared less well.
At the beginning of the year, the top 1-year ISA was paying 4.30% with Investec, but today the highest you can get is 4.14% from Shawbrook.
“Whilst we are certainly seeing a lot of rate reductions across the whole of the market, it’s a bit of a mixed bag in the best buy tables at the moment,” Bowes adds.
“There are some good rates to be found if you are prepared to shop around and use a provider that you are not so familiar with.
“And with the latest inflation figures slightly higher, there could be some respite for savers before rates start to march downwards once again.”