There’s no denying that the last six months have been financially turbulent to say the least. With so many changes to the economic landscape in such a short space of time, it’s hard to keep track of the impact on UK savings.
Over the year, The Bank of England’s base rate has increased steadily and now stands at 5%, so savers assumed rates on savings accounts would become more competitive.
Unfortunately, rates haven’t increased as quickly and many have called for banks to act, including the Financial Conduct Authority (FCA), who released a statement last week explaining that it had challenged firms on why their decision making has been so slow.
Lucinda O’Brien, expert at money.co.uk savings accounts, said: “The biggest change we’ve seen to rates this year occurred in April, when the average interest rate for an easy/instant access account increased by 28.37%.
“The average interest rate for this type of account in March stood at 2.08% and then it jumped to 2.64% in April. This could be due to the base rate increasing to 4.25% on March 23, and then news that we would expect another hike in May.
“Elsewhere, both Cash ISAs and notice savings accounts saw significant rises, however fixed rate bonds didn’t suffer the same big jump, instead maintaining a steady increase.
“Two-year fixed-rate bonds performed the best when the average interest rate hit 4.57% in June. This growth has now continued as we are seeing top interest rates of more than 6% in July.
“Overall, the average rates have risen during the past six months but in comparison to the rising household costs and mortgage rates, it is underwhelming.
“Across all the accounts from January to June 2023, the highest rate we saw was 5.9% from a one-year fixed-rate bond. Plus, the average shows this was not the majority as many banks chose to keep their rates lower than the base rate.
“The glimmer of hope is when you compare the maximum interest rates for each account from January to June, as there were some banks that did increase their rates.
“For example, the maximum interest rate for an instant/easy access account in January was 3.35% and in June it was 4.5%, which is a 34% increase. This was similar with an instant cash ISA as the maximum interest rate in January was 2.85% and it reached 4% in June – a 40% increase. This is in line with the base rate increases as that rose by 42% from January to June.
“Hopefully, with the likes of the FCA putting pressure on banks to act, we should see some more positive average rates in the second half of the year.”