Savers to take more interest as returns rise

THE tide may finally be turning in favour of savers as rising interest rates improve returns on cash deposits, while triggering a stock market sell-off.

Investors fear higher borrowing costs and lower central bank stimulus will hit economic growth and share prices.

“Equity and bond markets are in disarray. It marks by far the worst beginning to a year this century,” said George Lagarias, chief economist at Mazars.

Yet tomorrow the Bank of England is expected to increase base rates to 1 per cent and there are signs savings rates are finally starting to pick up, too.

If the BoE’s Monetary Policy Committee does hike rates tomorrow, it will be the fourth increase since December, when they stood at just 0.10 per cent.

The big banks have been reluctant to follow suit, lifting their easy access rates from 0.01 per cent to 0.1 per cent at best, but a new report suggests there are much better deals out there.

Today’s top six easy access accounts now pay 1.20 per cent on average, up from 0.44 per cent a year ago, based on a £10,000 deposit.

The current best buy easy access deal, the Chase Saver Account, pays 1.49 per cent.

Challenger banks dominate the best buy tables, as Aldermore pays 1.25 per cent on easy access, Zopa offers 1.19 per cent and Tandem 1.10 per cent.

Instant access cash Isa rates have picked up, too, with Cynergy Bank paying a marketleading 1.05 per cent, while Marcus by Goldman Sachs and Saga both pay 1 per cent.

Moneyfacts finance expert Rachel Springall said base rate rises have spurred banks and building societies into action, but challenger banks dominate the top rate tables. Yet shopping around is vital because more than eight in 10 easy access accounts still pay less than 0.75 per cent, Springall added.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, warned against leaving too much money on easy access now: “The vast majority of easy access cash is sitting with the high street giants, earning next to nothing.”

She said everyone should have an emergency fund covering three to six months of essential expenses, but leaving more there is an expensive mistake.

Fixed-rate savings accounts are improving, with Shawbrook paying 1.96 per cent for one year, United Trust Bank paying 2.50 per cent a year for three years and PCF offering 2.75 per cent for five years.

With interest rates expected to rise further as the Bank of England looks to fight inflation, better deals could soon follow.

The stock market provides a much better return over the longer run, but many will be understandably wary as rising interest rates, reduced stimulus, the war in Ukraine and also Chinese Covid-19 lockdowns trigger volatility.

A growing number of Britons are struggling to save any money at all, with more than four in 10 saying they will not be able to put anything aside in the next 12 months, official figures show.