Last month the Bank of England cut the base interest rate for the first time since 2020.
Rates were cut as inflation seemed to have cooled, falling to the 2% target. But just as quickly as it fell, inflation’s now bounced back up to 2.2% – the first time it’s risen this year.
It means the Bank of England might now be rethinking another rate cut this month.
Here’s what this could mean for your savings and what you can do.
This article isn’t personal advice.
Time is running out for fixed savings rates
Since the Bank of England lowered the base rate, the number of fixed savings rates have fallen off a cliff.
At the start of August, there were 30 one-year fixed rates paying 5% or above. Now, there’s less than 10.
After a short pause, longer-term fixes from two to five years, have continued their downward trend. With the average fixed rate from two to five years dropping below 4%.
Even though the base rate could be held this month, it’s still expected to fall in the long term. That means savings rates are likely to keep falling. So, the longer you wait, the more you could miss out.
Fixing now will secure you a higher rate while other rates in the market fall. Plus, you’ll get guaranteed returns.
Just remember, you usually can’t withdraw from fixed rates until the term ends.
What’s happened to easy-access savings rates?
Easy-access rates move in line with the base rate, so the slash in the base rate in August had an immediate impact.
The average instant and easy-access rates have fallen to 3.07% in September. That’s the first dip below 3.10% in 12 months.
But the value of easy-access savings goes beyond the rate.
As a rough rule of thumb, you need three to six months’ worth of essential expenses in an easily-accessible account. Easy access accounts allow withdrawals within one working day.
If you’re retired, you’ll need more – one to three years’ worth is sensible. This is a starting point, how much you’ll need will depend on your own circumstances.
And with competitive easy-access rates still around double the rate of inflation, you can make ‘real’ returns (above inflation) with your emergency cash.
How to make it easy
Most high street banks are still offering rates below inflation, meaning you’re losing spending power.
Finding better rates is a no-brainer.
So, why are there still billions sat in low-paying accounts with big high street banks?
Lots of us just don’t want the hassle. Searching rates tables, opening new accounts and juggling logins.
With Active Savings you don’t have to.
You can find great rates from multiple banking partners, all through one easy-to-use online account.
Plus, if you act by 26 September, you could get cashback. Terms apply.
What are you waiting for?
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.