The easy access market has been on an extraordinary journey over the last 18 months, so if you haven’t reviewed your accounts, now is a good time to do so – it’s likely to be an easy way to add valuable pounds to your pocket.
With inflation once again proving to be more stubborn that expected, the markets are now expecting the Bank of England base rate to be increased to 5% this year, up from a previous expectation of 4.50%. So, this could mean more rate rises for savers.
Easy access accounts are the backbone to most people’s financial wellbeing. We are all encouraged to keep at least six months’ worth of income readily available in case of anything untoward happening. But there’s no point in leaving this cash languishing in a poor paying account, when it could be working harder and earning some interest in the meantime!
What has happened to easy access savings rates over the last 18 months?
With rates paying as little as 0.01% just 18 months ago, it’s hard to believe that the best easy access accounts are now paying as much as 3.71% AER – but are you earning as much as that? When the base rate was cut to 0.10%, the average rate of available easy access accounts dropped to just 0.12%.
Back in January last year, just after the base rate increased for the first time from its historic low of 0.10% to 0.25%, even the very best easy access rate available was paying just 0.67% and the problem is, as base rate has increased and therefore savings rates have increased too, it has not been an equal rise. As we have come to expect, some providers have been better than others at passing on the last 11 base rate hikes.
For example, anyone holding the Virgin Money Everyday Saver has not seen an increase at all since December 2021 – the account is still paying 0.25%. On the other hand, if you had opened the Aldermore Double Access Account Issue 1*, you would have seen the rate you are earning increase from 0.75% in December 2021 to its current highly competitve rate of 3.55% on balances of £1,000 plus. The account must be opened online and as the name suggests, you can only make two penalty free withdrawals per year.
As well as the Aldermore account, there is an online account from Shawbrook Bank paying 3.65% for new customers only – with a minimum deposit of £1,000 and with no restrictions to the number of withdrawals that can be made.
But beating them both is the recently increased app-only Chip account paying 3.71% on balances of £1 plus*. The highest easy access rate we've seen by far, in Savings Champion's history!
What is an app-only account?
Those who have a smart phone or a tablet are likely to be very familiar with apps, the catchy name for a downloadable application that allows users to perform specific tasks on a mobile device.
Opening a savings account via an app is the next evolution for technology in savings.
Although some savers may feel less inclined and confident to use an app-only savings account, for others it makes the whole process simple and really mobile – especially if you want to move your cash around in a hurry.
An indication that this market is growing and will continue to do so is not only that there are more app-only banks nowadays, but that many providers are adding apps to their armoury, presumably due to the demand. These apps allows customers to open, manage and view their current and savings accounts on their mobile devices - making everything available at your fingertips.
It wasn't too many years ago that online-only accounts were regarded with some suspicion and popular with a much smaller proportion of savers – these days many more feel very happy to open and manage their savings online, but the fact is that in order to earn the top rates not only do online accounts dominate , you may also need to download an app.
What other options are there?
Of course there are still postal, branch and telephone accounts but you are often penalised with a lower rate. For example, with the best online account paying 3.65% AER, the best easy access account that can be opened by post is with Kent Reliance. The Easy Access Savings Account Issue 57 is paying 3.45% - so not vastly lower but lower nevertheless.
That said, for those with smaller balances, there is also the Yorkshire Building Society Rainy Day account that is actually paying 3.60% AER but only on a balance of up to £5,000 – anything more will earn 3.10%, diluting the overall return. For example, if you were to deposit £50,000, you could expect to earn a blended rate of 3.15% AER. There is also a restriction on the number of penalty free withdrawals of two pays per year based on the anniversary of the account – but the account can be opened either online, by post or in branch.
What next for easy access accounts?
As mentioned above, the markets are currently predicting more base rate hikes and variable rate savings accounts are very responsive to this. So as well as the rate rises we have already seen there could be more around the corner. And with easy access accounts, as the name implies, if you do find a better rate elsewhere you can easily move your cash to make it work even harder. So why wait to start earning more interest on your easy access money. Make the switch now.
For the latest rates take a look at our best buy tables. Even better sign up for our Weekly Best Buy Table email, delivering the top rates to your inbox once a week.
*We are occasionally paid by some providers if you click through from our Best Buy Tables and open a savings or current account with them. We will never accept a payment that compromises in any way our independent, whole of market approach to providing information on savings products. For clarity we will indicate those companies who remunerate us with an asterisk (*).
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