UK households are always 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 still having a moment even after the Bank of England (BoE) held interest rates at 4.5% in March. While homeowners face lofty mortgage rates, there is a silver lining in higher borrowing costs, and consumers can find UK savings accounts offering rates above inflation.
Markets have priced in a 100% probability that the BoE will lower rates by 25 basis points next Thurday, amid mounting concerns that a breakdown in global trade could weigh heavily on the UK’s sluggish economy.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The market is now predicting that interest rates will fall more quickly than previously anticipated as policymakers move to shield the stuttering UK economy from a potential downturn — a risk exacerbated by Trump’s tariff wars.
“While lower borrowing costs might come as a relief to mortgage holders, they could spell bad news for savers, who have only just started to see decent returns on their cash after years in the doldrums.”
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Experts urge savers to shop around for the best deals and review their accounts regularly, as many may still be sitting on products that fail to beat inflation.
Ian Futcher, a financial planner at Quilter, urged savers to look around for the best deals. He said: "Lower interest rates, while beneficial to borrowers, tend to erode savings rates, particularly in easy-access accounts. Tariff-driven inflation could further weaken the real returns savers receive.
"With that in mind, savers should be proactive — locking into fixed-term deals where higher rates still exist or considering a diversified investment strategy tailored to their time horizon and risk appetite."
The UK inflation rate fell to 2.6% in the year to March, according to the Office for National Statistics (ONS). This means that prices have been rising at the slowest pace since December and are closer to the Bank of England's 2% target.
Savers should shop around to find the best deals and check what rate they are on. Providers have already started to lower rates as interest rates fall, so consumers need to check if their money is well-placed for higher returns.
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The main factor to consider when choosing a savings account is the difference between easy-access and fixed-term accounts.
Easy-access accounts allow you to access your money when you need it. Fixed-term means you can’t access your cash for the duration of the deal. They usually offer better rates, but you must be comfortable not touching your savings for an extended period, usually between one and five years.
LHV Bank pays 4.65% for one year, with interest paid on maturity at the end of 12 months. You can open the account with £1,000 and invest up to £1m.
Erki Kilu, CEO of LHV Bank, said: “LHV Bank is built for savers — a commitment that is reflected in the products and services we offer. At a time when market volatility is putting extra pressure on personal finances, our new one-year bond offers customers a fantastic option for growing their money and taking control of their financial future."
Cynergy offers 4.55% for one year with the same key conditions.
The Access Bank pays the same 4.55% for 12 months. The key condition is that you need at least £5,000 to open the account, with deposits capped at £500,000.
Online banks typically offer higher rates than traditional bricks-and-mortar branches, which translate into better returns, giving you a more efficient way to save and reach financial goals.
Digital-only banking use has grown for the second year in a row, according to research from personal finance comparison site Finder, with superior interest rates the biggest factor driving adoption.
If you prefer to go with a familiar name, the high-street lenders have slightly lower offers, but are still above inflation.
Tesco (TSCO.L) Bank offers the highest rate among high-street lenders, with a one-year fixed-rate savings account that pays 4.15%, with the minimum balance required being £2,000. However, you can invest up to £5m.
Nationwide (NBS.L) has a fixed-rate savings product offering 4% for one year. The minimum deposit is just £1 and interest will be paid on the anniversary of the date you opened your account (regardless of when the account was funded), at the end of the term, and on the day your account closes.
Unlike easy-access products, where interest rates can vary, fixed-rate accounts earn a set rate of interest for the period you choose, whether that's six months or several years. Those are the most common deals, but some offers go up to 10 years and over.
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You must leave your initial deposit for a fixed period without making withdrawals. If you touch your money, you forfeit any interest.
Easy-access savings accounts let you withdraw your money without notice. With that ease of access come lower interest rates, but they are a good option for those who think they might need their money in a hurry.
Be aware that rates on these accounts are variable, which means they can go up or down. You will be notified of any change ahead of time.
Sidekick has a 4.76% deal available that comes with unlimited next day withdrawals, meaning you can access your money whenever you need it, without restriction or loss of interest. The deal includes a 0.72% bonus for 12 months on balances up to £85,000. You need a minimum of £5000 to open the account and can investo up to £85,000.
Chip pays the same 4.76% but with a £1 minimum to access. You can invest up to £85,000 and the rate will fall to 2.1% after 3 withdrawals in a year.
Monument pays 4.75% but you need at least £25,000 to open the account, with deposits limited to £2m. You are allowed a maximum of three withdrawals per year.
There are even higher-paying easy-access accounts, but they are not for new customers. Santander's (BNC.L) Edge Saver, for instance, offers 6%, but is only available to current account holders.
Can’t decide on whether you want to put your money away and not touch it for a long time or keep it accessible at all times? Maybe you should consider a notice savings account.
Notice savings accounts require you to give notice to your savings provider before you can withdraw your funds.
These are ideal for those who know when they might need their cash but don’t want to face the temptation of dipping into it at any time.
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You need to give the bank or building society a set advance warning before you can withdraw your money — usually between 30 and 120 days.
OakNorth Bank via Prosper has a 95-day product that pays 5% in which 4.61% is paid daily into the account an 0.39% is a boost paid annually into the nominated account. You’ll need at least £20,000 to open it and can deposit up to £250,000.
Oxbury has a 120-day product that pays 4.85% for which you'll need £1000 to access.
Santander via Prosper has a 185 day deal that pays 4.83% but you'll need at least £20,000 to access it.
Interest rates with notice accounts are variable, which means they could go up or down over time.
For those looking to make the most of their cash savings, regular savings accounts offer up to 8% returns.
Most regular savings accounts require you to put money away each month with interest paid yearly. It is not uncommon for the offer to be available only to current customers.
Principality offers 7.5% in a six-month regular saver account, after dropping its 8% deal. You open an account and pay in up to £200 each month. Interest is calculated on the money in the account each day and paid six months after opening.
The Co-operative Bank has a 7% deal for existing customers. Fixed for one year, you can save up to £250 per month and can skip months without penalties.
First Direct also has a deal that pays 7%. You can open this account with £25, which is the same amount required to go into it every month. The maximum per month is capped at £300.
Every deal mentioned here is covered by the Financial Services Compensation Scheme, so you are protected up to £85,000 or double that if it’s a joint account.
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