Savers are being urged to lock in the best available deals as experts warn they will disappear after the expected interest rate cut on Thursday.
The Bank of England’s Monetary Policy Committee (MPC) is widely expected to reduce interest rates to 4.25 per cent after Donald Trump’s tariff plans reduced expectations for how well the economy will perform in 2025.
Forecasters expect a cut of 0.25 percentage points tomorrow, and more cuts later in the year, likely taking interest rates to 3.75 per cent by the start of 2026.
This is why experts are suggesting savers to act fast to take advantage of the top rates – with easy access and fixed-rate savings accounts currently paying more than 4.5 per cent – before they start falling.
Easy-access accounts pay the highest rates, but the rates can drop at any time. With a fixed account, you are guaranteed to get the rate for the length of time the account is fixed for.
With easy-access accounts, you can withdraw cash, but with fixed accounts, you have to keep it locked away for the length of the fix.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said much of the expected change on Thursday is already priced in, but savings rates will likely continue their downward trend in the months to come.
She said: “For savers, this means keeping an eye on your savings rate and being prepared to switch. You need to keep your emergency fund in easy-access savings, which are likely to drop.
“However, some banks will be in more of a hurry to cut rates than others, so you could more than double the rate from a pedestrian high street giant by shopping around among online banks and savings platforms.”
In terms of easy-access cash ISAs – savings accounts which do not attract tax – Plum offers the highest rate of 5.06 per cent according to The Private Office Chip is offering the best easy-access normal savings account rate at 4.76 per cent.
If you can afford to stash away your funds, fixed rates are “almost certainly” as high as they are going to be for some time, James Blower, founder of The Savings Guru, told The i Paper.
He said: “Now is certainly a time to consider whether you can afford to lock away at least a proportion of your funds for a fixed rate.”
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Ms Coles agreed, saying: “For money you don’t need for longer, this is a decent opportunity to consider fixed rate savings.
“Fixed rate deals, which guarantee the rate for a specific period – from a couple of months to five years – will let you lock in a rate for the duration.
“These have come down from the peak, but you can still make more than 4.5 per cent fixed for a year or almost 4.5 per cent when you fix for longer.
“You’ll need to pick the right length of fix for your circumstances – or a combination of a few of them – but if rates continue to come down as expected, these deals will look increasingly attractive.”
According to The Private Office, Cynergy Bank offers a 4.55 per cent one-year savings account.
If you want a cash ISA, you can get a one-year fix for 4.26 per cent, from OakNorth.
Fixed rates work slightly differently to easy-access rates when it comes to how the base rate cut impact rates, Mr Blower explained.
He said: “They tend to follow where the market thinks that rates are heading.“However, we have an unusual situation where markets expect base rate to head down to 3.75 per cent, by the end of the year, yet one-year fixed best buy rates are above 4.50 per cent still.
“This is because banks do not believe that rates will fall so fast. Given this, it is still a great time for savers to fix because, if the base is cut tomorrow, and is cut further again this year, we are likely to see fixed rates fall quite sharply in the second half of 2025.
“Although fixed rates have eased back in recent weeks, our expectation is the current rates paid are unlikely to be beaten this year, so we believe it is definitely a good time for savers to be fixing their rate.”
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Now is a good time for savers to consider securing a guaranteed return on their hard-earned cash as interest rates are expected to come down in the coming months.
“Those savers who have their cash stashed in an easy access account will be at the mercy of base rate cuts, so it is essential they review their accounts right now and monitor them to ensure they are still paying a competitive return.”
ISAs vs normal savings accounts – how they work
Unlike standard savings accounts, where interest earned above a certain limit is taxed, cash ISAs ensure every penny of interest stays in your pocket.
Here’s how the tax rules currently work:
Basic rate taxpayers (20 per cent) get a £1,000 personal savings allowance (PSA) – interest earned beyond this is taxed. Higher rate taxpayers (40 per cent) only get a £500 PSA – meaning they hit the tax threshold even sooner. Additional rate taxpayers (45 per cent) get no allowance at all – they’re taxed on every pound of interest outside an ISA.You can put £20,000 into an ISA each tax year, which runs from April to April, and you can split the money between cash and stocks and shares.
Stocks and shares tend to perform better over the long term, but your money can go up and down. With cash, it can only go up.
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