If you’re eager to give your finances a new year boost, maximising the interest rate on your savings is a good place to start.
Here’s the lowdown on the top-rated savings accounts. Plus, I’ve got four tips to help you get the highest return on your cash.
What easy access savings rates are available?
Right now, the highest easy access savings rate is 0.71% AER variable, via Investec. To open the account, you must make an initial deposit of at least £5,000.
If you have less than £5,000, then Cynergy Bank has an easy access savings account that pays a slightly lower 0.7% AER variable, which you can open with as little as £1. However, do keep in mind that Cynergy Bank’s headline interest rate includes a fixed 0.4% bonus for the first 12 months. This means that the rate will drop significantly in a year’s time.
So if you’d prefer an easy access account without a fixed bonus, then Shawbrook Bank has an account that pays 0.67% AER variable. This is another decent option, and you don’t need a fortune to open it. That’s because you can open an account with an initial deposit of £1,000.
Will savings rates improve this year?
There’s no denying that 2021 was a sluggish year for savings rates.
While the Bank of England (BoE) finally raised its base rate towards the end of last year (from 0.1% to 0.25%) savings rates hardly budged. However, the good news for savers is that many analysts expect the BoE to raise its base rate again this year.
One analyst holding this opinion is Ruth Gregory, senior UK economist at Capital Economics. Following the BoE’s decision to raise its base rate last month, Gregory commented: “I don’t think this is a case of one and done.” Gregory suggested the base rate would rise to 0.75% in 2022.
How soon any further increases occur is a matter for the BoE’s Monetary Policy Committee. The committee will make its first base rate decision of the year on Thursday 3 February.
For savers, the sooner further base rate increases occur, the better. This is because a higher base rate makes borrowing more expensive which, in theory, should lead to higher savings rates.
For more on how a higher base rate can impact savings rates, see our article on whether the base rate will rise again in 2022.
How can you boost the interest rate on your savings?
If your New Year’s resolution includes taking a closer look at your finances, then these four tips can help you boost the interest rate on your savings.
1. Consider ditching big-name banks
The top-paying easy access accounts are rarely offered by big-name banks. In fact, many big-name banks, including Barclays, Lloyds, HSBC and NatWest, all offer at least one savings account paying just 0.01% AER interest!
So if you’re relying on your high street bank for a decent rate, you could be missing out. Remember, your money is just as safe when saved with a lesser-known bank, as long as it has UK FSCS protection.
2. Consider ditching your easy access account altogether
Easy access savings accounts allow you to add and withdraw cash at will. However, they generally pay lower interest rates than fixed savings accounts, where you lock away cash. So, if you don’t need instant access to your cash, it’s worth exploring these accounts.
Right now, you can earn 1.36% AER fixed for one year with Investec, compared to the top easy access deal of 0.71% from the same provider. See our list of top-rated fixed-rate savings accounts for more options.
3. Look at regular savings accounts
If you can save on a monthly basis, you may be better off with a regular savings account. These accounts usually trump the rates offered by easy access or even fixed accounts. However, you often need to be a customer of a specific bank to open one, and you won’t be able to deposit a big lump sum.
See our list of top-rated regular savings accounts for more options.
4. Be prepared to move your cash regularly
The highest-paying savings accounts change frequently. As a result, it pays to be on the ball and move your cash regularly if you want to score the highest possible rates.
This is especially true for easy access accounts, where you can easy withdraw cash. For fixed-rate accounts, it’s more tricky, though it still pays to know exactly when your fixed period ends. That’s because after a fixed term ends, it’s often the case that your money will be transferred to a low-interest account.
Therefore, keeping on top of when your term ends will avoid your cash languishing in a sub-standard account.
Keen for more savings options? See The Motley Fool’s list of top-rated savings accounts.