Opinion: Why everyone should check their savings account rate to boost returns

Following the Bank of England’s base rate rise, The Money Edit’s Guy Anker discusses why it’s time to review your cash savings

Piggy bank, laptop, purse with money, coffee cup on wooden table top
(Image credit: Getty images)

Want the best savings account for your cash? Now could be the time to switch and get just that as interest rates creep up

The Bank of England last week raised the base rate – which underpins most savings rates – from 0.75% to 1%, its highest level for 13 years. If you’re lucky enough to have cash savings, then could this be an opportunity to make your money work harder? 

I would think so. Cash savings have been subject to poor rates for some time years, but now is the time to urgently review your rate. I suspect most people could get a decent uplift given rates are much higher than a year ago, not least if you’re one of the many on paltry 0.01% returns that some banks pay.

But before you shift your savings account or cash ISA, make sure the account you’re moving to meets your needs. For example, will you need to access it at short notice or are you happy for it to be locked away for a while for a higher reward?

Need easy access to your money? 1.5% interest is possible

Easy access accounts usually pay the poorest rate, but right now, you can bag 1.5% from digital bank Chase. You do need a linked current account to benefit from this, but that is a straightforward process and you can open the 1.5% savings account via the app.

If you’re looking for the best easy access cash ISA rate, look at Marcus and Saga, both of which pay 1%.

In a rising rates environment there is a chance other banks may overtake those deals but the beauty of easy access is that if better rates appear you can take your money out and get the higher return elsewhere. But just be sure to check the terms and conditions - some easy access accounts only allow a limited number of penalty-free withdrawals per year.

Don’t need easy access? It may be worth waiting to fix

If you don’t need access to your money in the next year, then you’ll certainly get a better rate - but be prepared to lock your savings away for anything from one to five years. If you take money out, you’ll be subject to a penalty which will wipe out any gains you make from interest.

Once your money is in there’s no going back so if rates continue to rise then you won’t benefit.

The problem is none of us know how much better fixes will get. The best deals pay more than 2% now but there is an argument that you could get a better return if you wait, in case interest rates keep rising.

Yet none of us have a crystal ball to know if that will happen, even if the mood music suggests it may. With that understandable constraint, it comes down to your attitude to risk as to when to fix.

Fixing now could get you about 2.15% in the top one-year fixed rate account or 2.8% in a five-year account. However, even though banks often fail to pass on full base rate rise to savers, there is a decent chance the top rates could rise soon as it tends to take a few days or even weeks for banks to react to base rate rises.

You could even wait till after the next base rate decision on 16 June in case it raises rates again, or even further into the future in case of further rises.

I can’t tell you what to do, but hopefully being armed with this perspective can help you make your decision.

Whatever you do, don’t do nothing

There’s no right or wrong answer as to whether to fix now or wait to fix.

If you’re not sure, it’s wise to check and at least get onto the best easy access rate, even if that is while waiting to fix.

Of course, not everyone will fall neatly into the examples I have given, while you may also want to invest your money too - especially if you are looking to save for five years or more.

But for now - don’t put up with anything less than 1% in cash savings.

Guy Anker
Guy Anker

Guy has extensive experience in personal finance journalism having joined The Money Edit after 13 years at MoneySavingExpert.com, most recently as deputy editor, and working closely alongside Martin Lewis. 

He has also worked at the Daily Mail as a personal finance reporter and his work has appeared in The Sun, Guardian, Observer, Mirror and other national newspapers. 

As a money and consumer expert, Guy is a regular guest on TV and radio – appearing on BBC News, BBC Radio 4, Sky News, ITV News and more. 

Guy also often speaks at events and appears on personal finance discussion panels. He has also been a judge for numerous industry awards.