Martin Lewis’ MoneySavingExpert (MSE) has revealed the exact rate you should get on savings – and why you shouldn’t accept less.
Savers have benefited from the best interest rates in 2023, after years of meagre returns.
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It’s important to get the best rates on your savings.
For example, if you put £100 into a savings account with a 1% interest rate, you’d have £101 a year later.
But if you saved the same amount with a rate of 5%, then you’d have £105.
The more you have saved, the greater the benefit.
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The rates that high street banks offer on savings accounts is usually tied to the Bank of England’s base rate, which until December 2021 was just 0.01%.
But a raft of consecutive rate hikes means it now stands at 5.25%.
And although banks are often slower to pass on the hike to savers, than they are with borrowing costs, banks tend to battle it out to offer market-leading interest rates.
So Martin Lewis’ MoneySavingExpert (MSE) is urging savers to make sure they are getting at least 5.2% interest on their savings.
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In the latest weekly MSE newsletter, the team said: “Don’t accept less than 5.2% interest on your savings.
“Rates continued to rise for much of 2023, though a hold in the Bank of England base rate led to a dip towards the end of the year.
“Overall, it’s a good time for savers to check what they’re earning – if it’s less than 5.2%, it’s time to ditch & switch.”
Where can I put my savings?
Right now, MSE say Metro Bank’s 5.22% easy access savings account.
You need to deposit at least £500 within 28 days, or you’ll get the lower rate of 1.65%.
But the rate will drop to 1.65% after a year anyway.
The best one-year fix is Ikano Bank’s 5.3% account. You’ll need to deposit at least £1,000.
The only downside to fixed bond accounts is that you’re forced to lock away your cash for a defined period of time.
So it’s always worth weighing up to see what’s best for you.
How can I find the best savings rates?
With your current rates in mind, don’t waste time looking at individual banking sites to compare rates – it’ll take you an eternity.
Visit comparison websites such as MoneyFactsCompare, Go Compare and MoneySupermarket.
These will help save you time and show you the best rates available.
These sites let you tailor your searches to an account type that suits you.
There are five main types of savings accounts, and understanding the differences can help you narrow down the options.
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- Easy-access savings accounts – usually allow unlimited cash withdrawals. However, this perk means they tend to come with lower interest returns.
- Regular savings accounts – generate decent returns but only on the basis that you pay in a set amount each month.
- Notice accounts – offer slightly higher rates than easy-access accounts but you’ll need to give advance notice to your bank (up to 95 days) before you can make a withdrawal or you’ll forfeit the interest.
- Fixed-rate bonds – these offer some of the highest interest rates. However, if interest rates increase during your term you can’t move your money and switch to a better account.
- Individual savings accounts (ISAs) – these can pay high interest but come with high withdrawal fees. But, Lifetime Isas are great for anyone aged 18-39 hoping to buy a house or save for retirement.
A major rule change means banks and building societies have just to tell customers their savings are earning next to no interest.
You can also join our new Sun Money Facebook group to share stories and tips and engage with the consumer team and other group members.
