What’s next for savings rates in 2024?

2023 was another big year for savings rates.

Fixed rates climbed past 6%, the highest level since 2008, and billions were poured into savings accounts.

A lot of fixed rates are still above 5%, but the market looks like it’s running out of steam and the window of opportunity is closing – it could be time to act now before it’s too late.

Here’s a closer look at where rates might go in the next 12 months, and how you could get more from your cash.

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

Fixed rate savings could fall further – what can you do?

In September, the Bank of England paused the base interest rate for the first time in nearly two years. This led to expectations that the rate had peaked – and might start moving down later in 2024.

These expectations have already been priced into the fixed-rate savings market. This means that if banks think interest rates will be lower in 12 months’ time, the 12-month fixed rates will start to fall.

And they have.

Most fixed rates started falling back in autumn – the first-time rates fell in nearly two years.

The market is expecting the base rate to drop slowly, so we don’t think there will be massive drops in the next 12 months. But we could see fixed rates drop below 5% in 2024.

If you’re waiting to fix, it’s worth thinking about what you’re actually waiting for.

The top fixed rates are still at the kind of levels we could only have dreamt of two years ago. Plus, if you fix now, your money will be getting that rate even if other rates keep falling.

This isn’t guaranteed though. That means, while it’s unlikely, if rates do rise, locking your money up could backfire.

Remember, fixed rates normally don’t let you take out your savings until after the term ends. It’s a good idea to make sure you’ve already built up an emergency savings pot you can get to quickly, before fixing other savings.

What could the future hold for easy-access savings in 2024?

Next year looks a little better for money in easy-access accounts.

The rates are sensitive to base rate movements. So, if the base rate stays the same, easy-access rates are likely to stay level.

That looks good considering the top easy-access rates are floating around 5% right now.

Everyone should have cash set aside in easy-access accounts for emergencies. And that means every saver should be benefitting from these higher easy-access rates.

But the reality is, big banks are still lagging behind, even with government pressure to pass the better rates on.

In December, moving your money from the average big bank instant access to a competitive easy-access rate could get you around 3x more.

Remember, inflation eats away at the spending power of your money. So, if you’re not getting the best rates in your current account, you’re losing out on more.

Withdrawals from easy access account can take one working day.

Cash ISAs – a tax-efficient way to save

As higher savings rates push people closer to their personal savings allowance, Cash ISAs are becoming even more attractive.

In 2023, nearly £40bn has moved into Cash ISAs. That’s a big number considering money moved out of Cash ISAs the year before.

Cash ISA providers set their rates the same way as non-ISA accounts. So fixed-rate Cash ISAs will continue to fall back slowly if the base rate drops. And even variable-rate Cash ISAs will fall back eventually.

ISA and tax rules can change, and benefits depend on personal circumstances.

How to make the most of your cash in 2024?

When rates fall, it’s even more important to shop around – especially if you hold cash with a high street bank.

If you’re not sure where to look, you could start with the smaller banks. Because of their size, they usually need to work harder to attract money, and that means offering better rates to their customers.

But chasing rates from bank to bank is a hassle we can all do without. That’s why we created Active Savings.

You can find and access great rates from our bank and building society partners, all in one easy-to-use online account.

Mix and match fixed terms that range from a few months to five years, all alongside your emergency easy-access cash pot. Rates come on and off all the time, so check our website for the latest.

A Cash ISA with a difference

You can only open a single Cash ISA per tax year with most Cash ISA providers. Which means choosing between either a fixed rate or an easy access each tax year for your tax-free cash savings.

But with the HL Cash ISA (part of Active Savings), you can spread your money across a fixed rate and easy access through one online Cash ISA.

That makes it’s easy to match your savings to your needs, without paying more tax than you need to.

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).