Base rate woe brings cheer at last for savers

BEST buy savings accounts already pay 5 per cent and could soon offer even more if the Bank of England hikes base rates tomorrow as expected.

The surge in savings rates has been a rare piece of recent good financial news, finally giving savers a decent return after years of getting next to nothing.

Base rates have been hiked for seven meetings in a row, lifting them from December’s 0.1 per cent to today’s 2.25 per cent.

Another big increase is forecast tomorrow as the BoE battles to curb inflation, with markets expecting a rise of 0.75 per cent, taking base rates to 3 per cent.That is the highest since 2008, exactly 14 years ago.

With yet another rise expected in December, market-leading savings accounts could even pay 6 per cent by the end of the year.

Santander has an easy access account paying 2.75 per cent on up to £250,000, but those able to lock their money away for a set term can do better.

Coventry Building Society offers a string of market-leading fixed-rate savings bonds, paying 4.25 per cent for one year, 4.60 per cent a year for two years and 4.75 per cent a year for three.

Charter Savings Bank pays 4.95 per cent fixed for two years, via the Hargreaves Lansdown Active Savings platform.

United Trust Bank’s five-year bond pays a fixed rate of 5.05 per cent a year from today.

Savers who do not want to lock money away can still get 5 per cent from regular savings accounts, but on limited sums.

Club Lloyds current account holders can get 5.25 per cent for one year, on a maximum deposit of £400 a month. Yorkshire Building Society pays members 5 per cent for a year on up to £500 a month. NatWest pays 5.12 per cent on £150 a month.

MoneyComms banking expert Andrew Hagger said the downside with regular monthly savings accounts is that by the time you have built up a worthwhile balance, the account closes. “You also have to pay in every single month to get that rate, as a rule,” he added.

However, if you deposited the maximum £400 a month in the Club Lloyds account, you would pay in £4,800 over the year, and earn £126 interest.

Barclays Rainy Day Saver account pays 5.12 per cent on balances up to £5,000 from day one, worth a maximum £256 in a year.The rate sinks to 0.25 per cent on sums above £5,000. It is only open to Barclays Blue Rewards members, though. “Shop around and read the small print,” Hagger said.

Rising interest rates have rekindled our love of cash savings, as total cash deposits hit £1.8trillion for the first time ever, said Alistair McQueen, head of savings and retirement at Aviva: “After years in the doldrums, the average rate on a new fixed-term cash deposit account rose by 0.55 per cent to 2.49 per cent in September.”

Interest rates look set to rise higher as the BoE attempts to control inflation, but this spike could pass if inflation turns into a recession. “For those with money to save, now is the time to shop around,” McQueen said.