Savers urged 'now is the time to fix' as leading accounts could offer £1,057 boost
Savers have benefited from interest rates beating inflation
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Those who can afford to lock their cash away for two years can benefit from a savings boost worth thousands.
Savers are urged to seize this "golden opportunity" to secure high interest rates before the Bank of England slashes the base rate.
In anticipation of the base rate cut, many major banks have already started to cut the interest rates on their mortgage deals.
Savers with a holding of £25,000 can secure interest rate boosts worth thousands if they take the plunge and lock away their money in the top-paying fixes.
Sarah Coles, personal finance expert at Hargreaves Lansdown explained two-year accounts should be on savers’ radar.
She said: “If you have savings you don’t need to get your hands on in an emergency, then now is a really sensible time to consider locking in a fixed rate.
Millions of Brits have adopted new savings habits since the pandemic PEXELS“It’s a golden opportunity, coming after inflation has fallen away and yet before rate cuts have kicked in, so you can still get more than five per cent on accounts fixed for one or two years.
“The Bank of England isn’t going to be in a hurry to slash rates, but they’re likely to get progressively lower.
“By the middle of next year, they’re forecast to be 4.5 per cent. Then by the middle of 2026 they’re expected to hit four per cent, and savings rates are likely to fall alongside them.
“It means if you don’t need the money for two years, it’s worth considering a slightly longer fix.”
Close Brothers Savings are offering the leading interest rate on the two-year account at 5.06 per cent. On their website, it explains that after 12 months, a saver with a £10,000 balance can expect to make £506 in interest. If that is double, savers stand to get over £1,012.
Savers who stash money away in the current best two-year account can expect to earn £1,012 on holdings of £10,000 when the fix matures.
A saver putting £10,000 into the leading one-year fix, 5.22 per cent with Union Bank of India, and then stashing that £25,000 away in another one-year fix next year at 4.5 per cent would earn £972 across the course of the two years.
This means they would lose £100 from not putting the sum into a sole two-year account.
If people stash their money away for longer, it's important to consider any possible tax implications.
Everyone has a Personal Savings Allowance which is the amount of savings interest one can earn tax-free each tax year.
The amount of allowance someone gets depends on the type of taxpayer they are:
- basic rate taxpayers (20 per cent) can earn £1,000 in tax-free interest each year
- higher rate taxpayers (40 per cent) can earn £500 in tax-free interest each year
- additional rate taxpayers (45 per cent) don’t get an allowance
LATEST DEVELOPMENTS:
The Bank has held the base rate at 5.25 per cent for 10 consecutive months now. Economists expect the base rate to finally fall in August, following the falling inflation figures.