Experts reveal four savings trends for 2024 – from Isas to Premium Bonds

It has been a great year for savings rates, with deals rocketing throughout the year – although, the past month has seen a tailing off.

The Bank of England hiked the base rate 14 consecutive times between December 2021 and September 2023 before deciding to hold it at 5.25 per cent where it has remained for the last three months.

Since the decision to hold the base rate, savings rates have started to slip especially when it comes to fixed deals.  

From a cash Isa explosion to cash platform launches, we asked savings experts for their predictions for the savings market in 2024.

Looking into the crystal ball: Savings experts predict that the cash Isa boom will continue into 2024 while fixed rate accounts will lose their appeal

1. Cash Isa boom

Earlier this year, a report from the Bank of England revealed that cash Isas saw the largest inflows for the start of the tax year since Isas were launched in 1999.

Savers funnelled more than £3billion into Isas in July – the highest inflows for July since 2014.

In the first three months of the 2023 tax year, savers piled more than £9billion into cash Isas – the largest inflow since Isas were launched in 1999, and the first time the balance has been positive since before the pandemic.

In 2024, savings experts predict there could be even more competition in the cash Isa market.

Andrew Hagger, founder of personal finance website Money Comms says: ‘There could well be more competition in the cash Isa market with the Government allowing you to hold multiple Isa subscriptions from April 2024.

At the moment if you open a cash or stocks & shares Isa with one provider, you have to stick with them for that tax year, but next year you will be free to switch, so it could lead to improved rates on tax free savings accounts.

Hagger continues: ‘Isas will once again be popular because even as rates start to edge back, many savers will be in danger of exceeding their annual Personal Savings Allowance (PSA).

‘Even with savings rates at 4 per cent someone with £25,000 will hit the £1,000 limit for standard rate taxpayers in one year – when rates were around 1 per cent you would have needed a nest egg of six figures to be in danger of exceeding the £1,000 PSA threshold.

‘We could potentially see Labour back in power in for the first time since 2010 and so we will have to wait and see if it decides to tweak any rules and limits around PSA and or Isa savings.’

James Blower, founder of website Savings Guru says: ‘I think we will continue to see strong interest in cash Isas. 

‘With new subscriptions only being of benefit for savers with very high savings balances and a few niche groups of savers, they’ve become more important for savers with even relatively small balances.

‘We will definitely see more people caught out by the increase in rates and the PSA not covering their interest earned, and then moving to cash Isas as a result.’

2. NS&I rate cuts

Savings experts also predict NS&I rate cuts could be on the horizon in 2024.

Recently, the Treasury-backed bank announced it hit its fundraising target for the year with an excess of £2.3billion, raking in £9.8billion from savers over the past six months.

In the Autumn Statement, the Government did not change the target for how much it wants NS&I to raise in the current tax year – freezing it at £7.5billion.

NS&I has already pulled its best-ever Guaranteed bonds which paid a bumper rate of 6.2 per cent and cut the rate on its Green Savings Bond. Now experts think it’s highly likely that other accounts will be up for the chop too.

James Blower says: ‘NS&I is hard to predict as NS&I’s year-end isn’t until 31 March and we aren’t likely to know much before then what their target for their next financial year is, so that makes it difficult to call at this point.

‘However, at this point in time, I am not expecting to see a higher need for funding from them and think we will see their rates held until the end of their financial year and I can foresee cuts to them in 2024/25 as rates fall generally.’

While Andrew Hagger says: ‘Any base rate cut will be pretty much mirrored by easy access savings accounts, so don’t be surprised to see best buys well below 5 per cent by the end of next year.

‘It could also trigger a cut in NS&I products too but it depends on what its new financing figure will be from next April.’

3. Cash platform growth

A raft of providers have launched savings platforms over the past few months, including over-50s specialist Saga, Savings Champion and Charles Stanley.

With the top savings rates changing rapidly throughout this year, getting the best deals involves time and legwork.

Savings platforms have grown in popularity because they are seen as taking the work out of staying on top of the best savings accounts. They are websites that allow you to hold several savings accounts in one place.

The benefit is that you can hold multiple savings accounts with a number of providers in one place, accessible throught one portal.

In 2024, James Blower believes cash savings platforms will continue to grow.

He says: ‘I expect to see Bondsmith have a strong year and ultimately look to rival the two largest platforms, Hargreaves Lansdown Active Savings and Flagstone.

‘One to watch could be Aviva Save – it’s performance has been awful by comparison to HL and Flagstone whereas it has all the attributes to rival them. I think 2024 could either see it completely revamped as a serious contender or the complete opposite – Aviva withdraw from the market all together.’

Head to head: Savings experts say NS&I’s 6.2% rate threw the one-year fixed rate bonds market off kilter

4. Fixed-rate accounts will lose their appeal

Savers have enjoyed some of the best rates on fixed-rate accounts since 2008.

 Earlier this year, NS&I launched a blockbuster 6.2 per cent one-year fixed-rate bond – but it was pulled after 5 weeks and one-year fixed-rate accounts never reached the same highs. Many experts believe this marked the peak of the one-year fixed-rate market.

Mark Hicks, head of Active Savings at Hargreaves Lansdown says: ‘NS&I was a dominant force in the second half of the year and distorted the market in September by artificially holding up the savings market with their 6.2 per cent offer in one-year fixed rate bonds.

‘Given the significant amount of deposits that were brought in throughout September, we don’t expect to see any additional aggressive moves to the top of the market in the near future and into 2024.’

With the gap between easy-access and one-year fixed-rate accounts narrowing, and experts expecting easy-access rates to hold firm, savers may see little point to locking away their money.

The gap between these accounts now stands at just 0.5 per cent as fixed-rates continue to fall.

James Blower says: ‘The strong growth in fixed rate bonds will ease back in 2024 as fixed rates fall and get closer to parity with easy access rates – savers will decide it is not worth locking their money up because there’s no or little premium for doing so.’

The best one-year fixed-rate account currently pays 5.7 per cent interest and savings experts expect this rate to continue to drop throughout 2024.

This post first appeared on Dailymail.co.uk