Analysts are sounding the alarm that bank customers are falling into money-losing "traps" when it comes to easy-access savings accounts.
Savers can now earn up to 5.25 per cent on an easy access cash ISA, outperforming fixed-rate accounts in an unusual market twist.
Easy access savings accounts are offering 4.75 per cent, while fixed-rate deals lag behind at just 4.61 per cent for one year, 4.63 per cent for three years and 4.55 per cent for five years.
This reverses the traditional savings hierarchy where locking money away typically rewards savers with higher returns.
The current situation presents a tempting opportunity for savers who might normally choose fixed-rate accounts for longer-term savings.
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Easy access savings accounts are at in particular risk, analysts claim
GETTYDespite this, experts warn there are potential "pitfalls" to this approach that savers should be aware of when looking for the best deal.
Sarah Coles, the head of personal finance at Hargreaves Lansdown, broke down the impact of this market anomaly.
She explained: "Usually you're rewarded for tying your money up with a higher rate. However, this hasn't been the case recently, and it comes down to what the market expects to happen to rates."
Fixed rates are pricing in expected rate cuts over the next year. Meanwhile, easy access rates reflect today's higher rates that aren't expected to fall immediately.
The Bank of England has been making changes to interest rates GETTY Meanwhile, easy access rates reflect today's higher rates that aren't expected to fall immediately. The unusual situation with cash ISAs offering better rates than standard savings accounts is driven by platform competition.
"Banks aren't prepared to offer better rates than the platforms, because it's an incredibly competitive market," noted Coles.
One of the biggest risks for savers is unexpected rate cuts. "The rates on easy access accounts are on their way down," warned Hargreaves Lansdown.
Usually, banks and building societies cut rates simultaneously in one dramatic move. Instead, they gradually reduce rates in turns, ensuring no single institution pays too much for deposits.
This means your attractive 5.25 per cent rate could quietly diminish in the coming weeks. Savers who don't monitor their accounts closely may find themselves earning significantly less interest than expected.
The market is expected to return to normal patterns after "another rate cut or two," according to Coles. Experts advise savers to remain vigilant about their rates and be prepared to switch accounts quickly when cuts occur.
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Britons could be hit by a tax on savings interest GETTY"If you don't keep your eye on it, and switch as soon as the rate is cut, you'll end up making far less interest than expected," cautioned Hargreaves Lansdown.
Furthermore, Britons are being told they may not be able to find a better deal elsewhere once interest rates go down.
Coles added: "You might decide to cash in on strong rates on easy access accounts now, and pledge to move into a fixed rate deal when those rates fall. However, those fixed rate deals are likely to be falling too, so when you come to lock in a rate, it may be much lower than the one on offer when you were first looking.
"It may mean that in order to gain a couple of months at a higher rate, you end up stuck with a worse rate for a couple of years - unwinding any benefit of rate chasing. When you’re you’re weighing up the relative attractions of fixed rates and easy access, you need to bear this in mind."
