It's possible that providers are now reviewing their market positions – particularly when it comes to fixed rates – as the prospect of further interest hikes in the coming months becomes less likely.
Here, Which? takes a closer look at what's happening to the savings market and reveals which accounts savers can still get record returns on.
Fixed rates are falling
Savings interest is partly tied to changes in the base rate. When it's high, saver's deposits offer banks a cheaper source of borrowing and providers raise their rates to entice new customers. We've therefore seen rates rocket for all types of savings account, with one-year fixed-rate deals, in particular, hitting levels not seen since 2008.
There are now signs that providers have started slamming the brakes on savings interest following last week's base rate decision, with competition appearing to cool off.
This table shows the top rates for one to five-year fixed-term savings and easy-access accounts on the day before September's base rate announcement, with the best deals at the time of writing (27 September).
Find out more: .Don't wait to fix
Just one week after the base rate decision, the table shows rates for longer-term fixes are already starting to fall. While the top rate for two and one-year fixed accounts is unchanged.
It appears that competition for the best one-year rate has also stalled. NS&I has held the top spot for that account for almost one month now, since hiking rates to 6.2% AER on 30 August 2023.
It's still early days, and we don't yet know whether this is a trend that will continue in the coming weeks. But don't wait before locking into a top fixed-rate deal. In the time that you're holding out for a better deal, any cash held in a current account is probably earning little to no interest. It will also lose value as it won't be keeping up with inflation, which stood at 6.7% in August.
If you're afraid of missing out, you could always open a fix today and wait to fund it. You usually have 14 days to deposit money. If after that period the rates do go up further, you can go ahead and invest elsewhere. Otherwise, you can stick with the original account and reap the benefits of a market-leading rate.
Find out more: .Instant-access rates still on the rise
Because rates on easy-access accounts are variable, they're more inclined to go up or down when the base rate changes. You might therefore expect providers to have also reduced interest on these products. However, Moneyfacts data shows easy-access rates are still rising.
The best available rate for an instant-access savings account is currently 5.1% AER from Leeds Building Society – up from the top rate of 5.02% offered by Shawbrook Bank on 20 September.
Your provider should get in touch to give you notice of any interest changes – and if rates do take a dip, you might need to switch elsewhere to make sure you're still getting a competitive rate.
Higher interest can come at a cost
Soaring savings rates are exciting, but if you have a large lump sum to invest, you could end up with a tax bill.
The personal savings allowance means basic-rate taxpayers can earn up to £1,000 a year in savings interest tax-free, while higher-rate taxpayers get a £500 limit. Additional-rate taxpayers have no personal savings allowance.
In a climate of low savings rates, these allowances have been more than enough for most savers not to worry about exceeding them – but, the higher rates rise, the easier it is to end up having to pay a chunk of your earnings to HMRC.
Basic-rate taxpayers earning 6.2% AER on their savings, for example, could end up paying income tax on interest earned with £16,130. If you're a higher-rate taxpayer, the tipping point drops to just £8,065.
Find out more:source https://www.which.co.uk/news/article/is-now-the-time-to-fix-a-rate-for-your-savings-ahcTF6N64V6v