Savers received an unwelcome early Christmas surprise when the Bank of England cut its base rate to 3.75 per cent.
This is the lowest the benchmark rate has been in almost two years and, inevitably, savings rates will follow it down.
What shocked me was just how quickly providers lowered rates. At one time, it would take a month or two. Now it takes just hours for some to pass on a cut to savers.
They came thick and fast from big banks, new banks, building societies and the app-based accounts offered by newcomers such as Plum, Chip and Moneybox.
Cuts from others are on the cards but there are still decent deals out there. Easy access savings deals remain popular, but my tip is to target a fixed deal, where competition is keeping rates high.
The smart move now would be to take a one-year fixed rate, says Sylvia Morris
As variable rates may fall yet again, it could be a smart move to tie up any money you do not need for a year in a fixed-rate bond or cash Isa.
One-year fixed-rate bonds edged down in the last couple of weeks, with the top payers now 4.45 per cent from Union Bank of India UK, 4.4 per cent from Chetwood, and 4.35 per cent from JN Bank.
Snapping at their heels is National Savings & Investments (NS&I) with its 4.2 per cent one-year fix.
NS&I looks like a winner to me with your money 100 per cent backed by the Treasury.
And it may be your last chance to buy, as NS&I could shave it soon as it glides to the top of the best buy table.
> Check our best buy fixed rate savings tables, compiled by Sylvia Morris
If you haven’t yet used your cash Isa allowance, go for that rather than a bond. Top rates are around the same level, and your interest is tax-free.
Top one-year fixed cash Isa deals come from Investec Bank and Tembo, both 4.3 per cent, Kent Reliance at 4.25 per cent, and Vanquis Bank at 4.2 per cent. NS&I does not offer a fixed-rate cash Isa.
On easy access savings, expect a rate of about 4 per cent. Charter Savings Bank and Kent Reliance have already cut rates to new savers, paying 4.06 per cent and 4 per cent respectively. Shawbrook Easy Access Bonus 4 is now 4.04 per cent, but the bonus runs out after a year.
Vanquis Bank Triple Access Saver issue 4 is at 4.08 per cent after a cut, but you can make only three withdrawals a year. In my star buys below I don’t include accounts limiting withdrawals or paying bonuses in the first year, but I do keep you informed of them in this column. So make sure you don’t fall foul of these catches.
> Check our cash Isa best buy savings tables
A bad year for savers
Rate cuts are the final blow from an annus horribilis for savers.
Over the past 12 months base rate has fallen by 1 percentage point, while the cash Isa limit for under-65s will plummet from £20,000 to just £12,000 from April 2027 – hitting around 1.3 million savers.
At the same time, tax rates on savings interest will go up to 22 per cent for basic rate payers, 42 per cent for higher rate payers and a whacking 47 per cent for additional rate payers.
Meanwhile the personal savings allowance – the interest you can earn tax-free in an ordinary account – remains stubbornly stuck at £1,000 for basic rate taxpayers, £500 for higher rate payers and nothing for additional rate payers.
Experts predict another base rate cut next year as inflation continues to fall.
We need to keep a close eye on what is happening to our savings rates – particularly in accounts which are no longer on sale.
