As 2024 draws to a close, the Bank of England has announced its final interest rate decision of the year - and as expected, it’s held the base rate at 4.75%.
For many savers, this will mean business as usual. They often only pay attention when the rate changes.
(For context: the base rate is the benchmark banks use to decide how much they pay us on savings and charge us for loans.)
However, those serious about their savings know inaction is risky and that regularly monitoring and managing your money is key to staying ahead.
Failing to act could mean missing out on opportunities to maximise your returns - especially with 2025 set to be a rocky year for savers, with some experts predicting rates plummeting to 2.75% by next autumn.
While no one can predict with 100% certainty what will happen to rates next year, the general consensus among analysts is rates will fall.
If that’s the case, it’s smart to plan ahead and take action now - especially if you’re sitting on a decent chunk of savings.
If you agree that rates will drop, plus you’re ok with locking some of your savings away, now’s a good time to considera term-based savings account.
As the name suggests, these accounts share a common feature: they require savers to commit to a certain condition in exchange for a higher interest rate compared to an instant access account.
There are two types: fixed-rate accounts and notice accounts.
With these accounts, you agree to lockyour money away for a set period of time (usually 1, 2, 3 or 5 years) in return for a guaranteed rate of interest.
Fixed deals have several advantages:
Right now, rates on fixed-rate accounts are reasonably competitive. On the Akoni platform, you can earn 4.3% AER* on a 2-year deal (compared to 4.2% AER on the best paying instant access deal).
While not a huge difference, it’s important to remember easy access accounts are variable rate so the interest rate is likely to go down in response to the base rate falling or other economic factors. Opting for a fixed deal means you’re locking in the rate for a set period - in this case 2 years.
If you're less certain about how interest rates will move or simply need more flexibility with your savings, a notice account could be a good option.
Think of it as a middle ground between easy-access and fixed-term accounts.
While you can't withdraw your money instantly, you still have access - as long as you give notice to your bank or provider.
Notice periods usually range from 30 to 180 days, and in return for this limited access, you'll typically earn a higher interest rate than with an easy-access account.
Advantages of notice accounts:
Keep in mind, some notice accounts have variable rates, so if the base rate falls, the interest rate on your deal might go down too. Plus, some limit how many withdrawals you can make during the notice period.
Rates on notice accounts are pretty competitive at the moment, with the top deal on Akoni offering 4.55% AER* on a 90-day notice period.
There’s no right or wrong when it comes to what to do with your savings. It depends on your individual circumstances.
But here’s a quick summary to help you decide:
If you think rates will fall:
● Put some of yoursavings in fixed-term accounts now to secure today’s rates. Compare deals for different terms (1-5 years) to balance return and flexibility.
If you’re on the fence about rates or need flexibility:
● Consider notice accounts, especially if you want a higher return without committing to along-term lock-in. Make sure you understand withdrawal conditions beforehand.
If you need quick and instant access to your cash:
● Keep some funds in a high-interest easy access account and consider fixed or notice accounts for medium- and long-term goals. Everyone should have some money in an easy access account for emergencies.
Rates on variable savings accounts fluctuate all the time. While base rate decisions often trigger changes, banks and other savings providers can alter rates at any time.
That’s why it’s important to stay on top of your savings and know how much you’re earning - and crucially, if you can be earning more. And lock in rates by opting for fixed or notice accounts if you can.
A platform like Akoni can make managing and monitoring your savings simple.
With one straightforward application, you’re able to set up multiple deposits and switch between deals seamlessly (or ask your adviser to do so on your behalf).
Ready to take the hassle out of managing your savings? Sign up for free today.
*all rates correct as of 16/12/24
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