UK savers told to ‘move fast’ ahead of expected interest rate change

Savers in the UK have been urged to take action to secure the best returns on their money as interest rates are forecast to start falling.

The Bank of England is widely expected announce a cut to interest rates on Thursday, with experts warning savers to “move fast” if they want to find the best deal for their savings.

Many providers are still offering competitive rates, meaning there are several savings accounts available on the market at 4.5 per cent or more.

The Bank’s base rate stood at a 16-year high of 5.25 per cent until mid-2024, seeing several cuts towards the end of the year and into 2025. It now stands at 4.5 per cent – still much higher than the 0.1 per cent seen in 2020 and 2021 – and is expected to be cut further.

Economists have said that a further quarter-point cut to 4.25 per cent on Thursday is a near-certainty. Looking to the next decision, which will come around 19 June, some even say the figure could be dropped to 3.5 per cent.

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the online investment platform, said: “A rate cut isn’t the best news for savers. Savers have enjoyed bumper savers rates in recent years, but that picture has changed since the summer of 2023 when savings rates hit their peak.

“With savings rates now firmly in retreat mode amid expectations of further rate cuts, those that want to preserve their return must move fast by securing the best deal possible while interest rates remain on the higher side.

“This is particularly important for anyone with money idling in a current account or an old savings account offering a dismal return.

Research by financial data provider Moneyfacts shows that the average easy access savings rate is currently 2.78 per cent, which will inevitably drop following a cut to the bank rate. The top-returning providers are the market include investment apps like Chip and Sidekick, both with accounts paying 4.76 per cent.

But Ms Haine says savers should also be wary of their Personal Savings Allowance (PSA), which has been frozen at £12,570 since 2016. This has meant more savers have found themselves paying tax on the interest they earn, lowering the overall return for them.

To offset this, the money expert recommends considering a tax-efficient savings strategy that also includes steps such as taking advantage of the tax-free ISA allowance and topping up pensions. These are two key ways to boost returns and also avoid a higher tax bill on them.

Despite the impact on savers, the likely rate cut will also bring some positive news for personal finances in the UK. Ms Haine’s comments: “A fourth interest rate cut would be great news for households hoping for further respite from punishingly-high borrowing costs.

“Those with large mortgages that need to be refinanced, or heavy debts, would be relieved by the potential for easing borrowing costs, though savers may feel disappointment at the prospect of a lower return on their savings pots.”