UK households are constantly looking for ways to make their money go further amid the cost of living crisis and savings accounts can help.
After years of low rates, high-yield savings accounts are having a moment as the Bank of England left interest rates at a 16-year high of 5.25%. While homeowners face higher mortgages, there is a silver lining in higher borrowing costs and consumers can now find UK savings accounts that offer higher inflation rates.
UK inflation hit 2% in May for the first time in nearly three years, according to figures from the Office for National Statistics (ONS).
Savers should shop around to find the best deals and check what their rate is – as they could still be sitting on a product that won’t beat inflation.
The main factor you should look out for when choosing a savings account is the difference between easy access and a fixed account.
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Easy access accounts give you access to money when you need it. Fixed, as the name suggests, are accounts where you do not have access to your cash for the duration of the trade. They usually offer better rates, but you have to be content with not touching your savings for a long time, usually between one and five years.
What are the best high interest accounts?
The best fixed rate account currently offers 5.22% and is available from Oxbury.
Its six month fixed rate offer requires a minimum of £1,000 and you can invest up to £500,000. No withdrawals are allowed for the duration of the deal.
Vanquis offers 5.21% per annum with similar terms. A fixed term personal savings account requires a minimum of £1,000 to be locked in for 12 months. You can invest up to £250,000. Withdrawals are not allowed for the duration of the trade and you can only open it online.
Access Bank used to be the best paying offer but now comes in third place with a one-year fixed rate that pays 5.20%. It requires a minimum of £5,000 and you can invest up to £500,000. Withdrawals are not allowed for the duration of the trade.
Online banks typically offer higher rates than traditional brick-and-mortar branches, which translates into better returns and gives you a more efficient way to save and reach your financial goals.
If you prefer a familiar name, lenders have slightly lower offers but are still above inflation.
Barclays ( BARC.L ) offers the highest rate among high street lenders, with a one-year fixed-rate savings account paying 4.65%. The requirements are not too strict, the minimum balance required is £500.
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Metro Bank is not far behind with its 4.61% interest rate and similar terms. The account has a fixed term of one year and the minimum amount you need to pay is £500.
Lloyds (LLOY.L) has a fixed rate savings product offering 4.35% for one year. However, the minimum deposit is £3,000 and you must have or open a Lloyds current or other savings account to be eligible. For new clients, the interest rate is 4.15%.
How do fixed rate savings accounts work?
Unlike easy access savings where interest rates can vary, fixed rate accounts earn you a set interest rate for a period of your choosing, be it six months or one, two, three or even five years. These are the most common deals, but some deals go up to 10 years or more.
You must keep your initial deposit for a fixed period of time without making any withdrawals. If you touch your money, you lose any interest.
What are the best easy access savings accounts?
Easy-to-access savings accounts allow you to withdraw money without notice. With this easy access comes lower interest rates, but they are a good option for those who think they might need their money in a hurry.
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Be aware that the rates on these accounts are variable, meaning they can go up or down. You will be informed about any changes in time.
Ulster Bank has the best paying offer for easy access accounts at 5.20%, but you need at least £5,000 to open an account.
Chase has the second best paying offer at 5.10%. There is no minimum required to open an account and you can invest up to £1,000,000.
Flagstone pays 5.07% with an easy-to-access account that pays interest daily. The account is provided through SmartSave and can be opened via mobile banking with a minimum deposit of £10,000.
There are even better paying easy access accounts, but they are not for new customers. The Santander ( BNC.L ) Edge Saver, for example, offers 7% but is only for current account holders.
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Skipton Building Society pays 5.5%, but again the deal is only available to mortgage holders or those who had a savings account with the lender before January.
What are the best savings accounts?
Can’t decide if you want to put your money away and not touch it for a long time, or keep it available? Perhaps you should consider a termination savings account.
Notice savings accounts require you to notify your savings provider before you can withdraw your funds.
They are ideal for those who know when they might need their money but don’t want to be tempted to dip into it at any moment.
You must give the bank or building society a predetermined amount of warning – usually 30 to 120 days – before withdrawing money.
Vanquis has a 90-day offer that pays 5.35%, which is currently the highest offer on the market. You’ll need at least £1,000 to open and you can deposit up to £250,000.
Monument has a 60-day notice account that pays 5.27%. This means that if you give the lender roughly two months’ notice, you can get your money with zero penalties. You need between £25,000 and £2,000,000 to apply.
Investec (INVP.L) has a 90-day notice account that pays 5.25% after three months. You need between £5,000 and £250,000 to apply.
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Interest rates with checking accounts are variable, meaning they could increase or decrease over time.
What are the best current savings accounts?
For those looking to get the most out of their cash savings, regular savings accounts offer returns of up to 8%.
Most regular savings accounts require you to put money away each month with annual interest. It is not unusual for the offer to be available only to existing customers.
Principality offers 8% on a six-month regular savings account where you just open an account and pay up to £200 each month. Interest is calculated on the money in the account every day and is paid six months after opening.
For existing customers, First Direct offers 7% per annum and allows a maximum monthly deposit of £300. You are not allowed to skip months, with a minimum of £25 deposited into the account each month.
You’re not allowed any penalty-free withdrawals, and if you close your account before the 12 months are up, interest drops to 2%.
The Co-op bank has a 7% deal for existing customers. Fixed for one year, you can save up to £250 a month and skip months without penalty.
Nationwide previously had a market-leading offer of 8%, but this has dropped to 6.5%. Nationwide is a current savings account store available exclusively to current account customers.
For all the above offers, you just need to open an account to access the deal.
Saffron BS pays 8% as part of a limited monthly loyalty program for members, but you had to have been a member since June 1, 2023 to be eligible.
Skipton Building Society is offering 7% but is limited to customers who joined before January 2024.
Every deal mentioned here is covered by the Financial Services Compensation Scheme, so you’re protected up to £85,000.
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