Headline UK inflation rose to 2.2% in the 12 months to August. This was widely expected and well below the 11.1% high of October 2022 but still slightly above the Bank of England’s (BoE) 2% target.
With prices still rising, the battle isn’t quite over yet.
Savings providers have kept a close eye on the base interest rate – and savings rates have stayed fairly stable with just small drops so far. But it’s very likely only a matter of time before they start falling.
With another possible base rate cut on the horizon, now might be the time to get your cash working harder and keep beating inflation.
This article isn’t personal advice. If your savings rate is lower than the rate of inflation, it reduces the future spending power of your money over time.
Inflation rising and interest rate cuts
Both easy-access and fixed savings rates holding up so far this year. But the BoE has just cut the base rate to 5% – the first cut in four years.
Right now, you can get savings rates at more than double the rate of inflation by shopping around for competitive rates. So, we think savers should take full advantage of this while they still can. And with more cuts on the horizon, the current rates might not stick around for long.
Is time running out for high savings rates?
AER stands for Annual Equivalent Rate and show what the rate would be if interest was paid and compounded once a year. It helps you compare the rates on different savings products.
Gross is the rate without any tax removed. Interest is paid gross. You are responsible for paying any tax due on interest that exceeds your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change
For one-year fixed rates, there’s a 4.76% AER*/Gross available with two more above 4.70% AER on Active Savings.
There are also two-year fixed rate products up to 4.70% AER, up to 4.50% AER for three years and up to 4.25% AER for five years. Minimum deposit requirements apply to individual products.
Rates won’t likely increase further and banks aren’t likely to wait around to cut their rates, so fixing now could get you the best deal.
Fixed term products pay a fixed rate which means you’ll benefit from the same rate for the duration of the fixed term while the rest of the savings market falls closer to inflation. Although nothing is guaranteed.
Remember, fixed rate products don’t usually let you withdraw your savings before the term ends. So before you fix, think about when you need access to your savings and make sure you have enough cash set aside in easy access savings for your emergency fund.
If you’re working, we suggest three to six months’ worth of essential spending – if you’re retired, it’s one to three years.
Want your cash working harder?
If you’re not going to need your money in the next five years, investing could make your money work harder over the long-term. Over a period a five years or more, investments typically give higher returns compared to cash savings. But investments can go down as well as up in value, so you could get back less than you put in.
But for those wanting their money within five years, Active Savings can help.
Looking for the best savings deal can be a hassle, it’s why so many don’t bother shopping around. But savings accounts like Active Savings are designed to make shopping for and getting better rates much easier.
You can access great, inflation-busting rates, from multiple banks and building societies, all through one easy-to-use online account.
Plus, right now you could be eligible for cashback.
To qualify, you must register for the offer and open a new Active Savings account by 26 September 2024. You'll then have 60 days to add at least £5,000 by debit card or Pay by Bank and deposit this into one or more savings products. See Terms for full details.
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).