Britons have got the savings habit back after pumping £3billion more into their deposit accounts than they took out in June as they race to grab today’s best buy rates of around 6 percent.
This follows net withdrawals totalling £3.4bn in May as savers raided their funds in a bid to combat the ongoing cost-of-living crisis.
Savers may get an added incentive tomorrow if the Bank of England hikes interest rates for the 14th meeting in a row. Markets expect the BoE’s ratesetting committee to lift the bank rate from today’s 5 percent to 5.25 percent.
On Monday, City watchdogs launched a crackdown on high street big banks which have been accused of ripping off savers by failing to pass on rate hikes, but experts say savers must take things into their own hands to get a decent return.
Fixed-rate bonds offer today’s highest savings rates with Melton Building Society paying 6.1 percent a year over two years and RCI Bank offering 5.8 percent for five years.
Savers responded by depositing £6.6bn into fixed-rate accounts in June with one-year fixes also popular, said Laura Suter, head of personal finance at AJ Bell.
Yet millions are failing to take advantage with a staggering total of £270bn sitting in accounts paying no interest at all.
“There is still a huge amount of work to do to encourage savers to move their money to accounts paying a decent rate,” Suter said.
Most easy-access accounts continue to offer disappointing returns with banks paying an average of just 1.46 percent today.
By contrast, challenger bank Shawbrook’s best buy rate pays a variable rate of 4.63 percent and Beehive Money pays 4.60 percent.
Suter added: “Shopping around is a bit of hassle, but if you’re looking at a difference between nothing and around 4.5 percent, it is well worth a few minutes of your time and work.”
Government-backed National Savings & Investments (NS&I) has fallen out of favour now that savers can get far better returns elsewhere, Suter added. “Taking a punt on Premium Bonds was more attractive when interest rates were rock bottom, but it’s a tough call when you can get better interest rates somewhere else.”
Savers may be tempted to delay taking out a new savings account in the hope that the BoE will keep hiking rates. However, leaving it too long could backfire.
If the BoE increases base rates at a slower pace, interest rates on fixed-rate bonds accounts may start to stall, said Money.co.uk’s savings expert Lucinda O’Brien: “It might therefore be a good time to lock in a high-interest rate and earn as much interest tax-free as possible today.”