🔔 Rates Rundown – will inflation slow the rate cuts?

Author: Anna Bowes
19th January 2024

I’m afraid that the fall in top savings rates has continued – and now even the top variable rate account rates available are starting to fall.

But the surprise increase in the Consumer Prices Index (CPI) could mean that the base rate may not start to fall as soon as the markets anticipate, so will the rate cuts start to slow? We’ll have to wait and see.

RATES ARE CORRECT AS AT THE TIME OF PUBLICATION (19/01/2024). All up to date rates can be found on our Best Buy tables.

Easy Access

Following weeks of very little activity, I’m afraid that market sentiment seems to be catching up with the top easy access accounts now.

That said, before the more recent withdrawals, there were actually a couple of rate hikes that brought new providers into the table. Firstly, Kent Reliance launched issue 69 of its Easy Access Savings Account, paying 5.11% AER and moving it into 5th place. However, the account was to be knocked off the table the following day when Charter Savings Bank launched issue 48 of its Easy Access Account, paying 5.13% AER.

However, as we started this week, things started to turn. Metro Bank was the first to drop out of the table, reducing the rate on the Instant Access Savings (Limited Edition) to 4.51% from 5.22% - but the good news is that those who have already opened the account before the change, will still continue to earn the higher rate – for the time being at least.

That left Ulster Bank back in the top spot. However it wasn’t to remain there for long as a couple of days later it made the Loyalty Saver account available only to Ulster Bank customers who already hold a current account.

That leaves Earl Shilton Building Society in the top spot, with its Bonus One account paying 5.15% AER. As the name suggests, this rate incudes a bonus of 3.05% that applies as long as no more than one withdrawal is made per year (1st March to the end of February).

The aforementioned Charter Savings Bank’s Easy Access Account - Issue 48, paying 5.13% AER is in second position now and allows unlimited access – although the minimum opening balance is £5,000. Cahoot is the next best, with a minimum opening balance of £1 and paying just a fraction less at 5.12% AER.

Fixed Rate Bonds

Fixed rate bond have continued to fall I’m afraid. Whether these cuts are close to stopping is to be seen, but things have been pretty active over the last couple of weeks. That said, there have been a few new bonds that have been introduced, bucking the trend. However they did not remain for long.

1 Year

At the time of our last Rates Rundown, the top rate in our 1-year table was 5.30% with Investec Bank, and the average of the top five was 5.23% AER.

SmartSave made a move for the top spot, getting back to its old tricks and upping the rate it was offering on its 1-year bond to 5.31% AER – but since Investec launched a new bond paying 5.15% the next day, SmartSave immediately followed suit and cut its rate to 5.16% AER.

For those who like the idea of locking some of their cash away for a shorter term, we have added a six month bond with ICICI Bank UK which is paying 5.11% AER.

This together with the two remaining entries paying 5.11% and 5.10% means that the average rate of our top five has now dropped to 5.13% AER.

2 Years

It’s been a bit more stable in the 2-year table, although the average of the top five has still fallen a little from 5.04% to 4.98%. A couple of weeks ago all five bonds were paying 5% or more – but that’s no longer the case.

The top bond is still the Union Bank of India UK Fixed Rate Deposit 2-Year, paying 5.15% and State Bank of India is the only other 2-year bond still in the 5% club. The withdrawal of bonds by Investec, Post Office, Earl Shilton and Secure Trust Bank saw off the only other accounts paying 5%, leaving the final three in our table paying between 4.90% and 4.95% AER.

3 Years

The remaining 5% bond in our 3-year table, which was offered by Post Office Savings has now gone, in fact it all change in this table as a couple of weeks ago the range of the bonds in our table were paying up to 5% from 4.70%. As we head into the weekend, all of the top five are now paying between 4.55% to the top rate of 4.60%. But it’s good to see a new name to our table – Newbury Building Society is in the joint top spot paying 4.60%, along with old favourites, Sensible Savings and Close Brothers.

5 Years

In the 5-year table, the top rate from Bank of Ceylon via Raisin UK paying 4.55% has gone – although a Raisin account is still in the top spot. Isbank is paying 4.50%* and Raisin has reintroduced its welcome bonus for those who are new to the platform. Those who open and fund an account with at least £10,000 can get a bonus of £25, which means you could earn a little more on your savings.

In order to receive the bonus, savers must enter the promo code 'RAISIN2524' whilst signing up for a new Raisin UK Account (enter this in the ‘promo code’ box), which you must do before midday on the 29th January 2024. Once your Raisin UK Transaction Account has become active you must apply for and open a savings account within the platform, and fund the account with a minimum of £10,000 by 11:59pm on 29th February 2024.

Sharia Fixed Term Accounts

We've not looked at this table for a little while as there's not been too much to report. However, as the top fixed rate bonds have fallen, this has left some Sharia Fixed Term accounts paying market leading rates.

Al Rayan Bank is paying 5.30% on its 1-year bond, making it the best bond on the market, and over 3-years, the Al Rayan bond is offering 4.95% AER making it head and shoulders above the top fixed rate bonds.

So remember to keep an eye on this table to check you are getting the best rates you can.

Fixed Rate Cash ISAs

The slightly better news is that the Fixed Term ISA best buys are holding up a little more although there have been some cuts here too.

Our 1-year table has been very quiet, and Shawbrook Bank is still at the top of the table paying 5.01%. And Charter Savings Bank launched an ISA paying 4.96%, taking the 2nd spot from Secure Trust Bank - so some unexpected good news there.

It’s not been quite as rosy in the 2-year table with the top rate available falling from 4.95% to 4.70% AER. Zopa is in joint 1st place paying 4.70%, moving up from 5th place a couple of weeks ago with the same rate. And the Post Office has two ISAs in this table, a postal and branch offering paying 4.70% and an online option paying a little less at 4.60%. It’s interesting to see postal and branch customers being offered a little more!

There have been a few reductions in the 3-year table too, with the top rate from TSB which was paying 4.50% being withdrawn and relaunched at 4.10%, taking it from top spot to 5th place. United Trust Bank is another provider to remain in the top five, but in a lower position, dropping from 4.35% to 4.15%, and from 2nd to 4th place. This has moved UBL up to the top, paying 4.41% and Secure Trust Bank into 2nd place paying 4.26%, while Zopa moves up from 5th place to 3rd with its ISA paying 4.21% AER. So, it’s not so much all change, but a bit of a switcheroo in this table.

The 5-year table had a rocky start, losing its top two ISAs which were both paying 4.30%, leaving UBL in the top spot paying 4.26% and dropping the average of the top five from 4.17% to 4.05%. However, since then there have been some positive moves which has pushed the average of the top five back up to 4.11%. Secure Trust Bank launched a new 5-year ISA paying 4% but then Mansfield Building Society went straight into 2nd place paying 4.20%. West Brom, which was one of those providers to withdraw a 4.30% ISA came back into the market as we ended the week with a new offering paying 4.10% but this still put in into 3rd place.

It's good to see that tax-free ISAs are holding up a little better than taxable bonds but I would hope that as we head towards the end of the tax year, there will be a bit more competition in the ISA market in particular. So watch this space.