UK interest rates are falling, but it's not too late to find a deal you can afford | savings

Britain's army of depositors have been given a wake-up call to check interest rates and move their money as quickly as possible if they receive a raw deal.

The Bank of England cut interest rates from 5% to 4.75% on Thursday, with inflation currently hovering at 1.7%.

However, at the time of writing, you could still choose between a fixed rate savings account of up to 5% and a simple access savings account of up to 4.9%.

The bank's decision means some savings rates will be cut and more interest rate cuts are (almost certainly) on the way, so you'll need to be wary and some decent deals won't last.

That means checking the Best Buy table and moving on to a better deal if your current product is lagging. Alice Hein, an analyst at investment platform Bestinvest, says those who want to preserve profits should move quickly by getting the best deals possible while interest rates are on the higher side. This is especially important for people who have money sitting in their checking account or in an old savings account that isn't earning much.

But this means overcoming inertia. Most savers (60%) have not made any effort to change the amount they have saved in the past year. Almost a third have not converted in the past five years, according to new research from rival platform Hargreaves Lansdown.

While there are many accounts that pay more than double the current inflation rate, many people have savings accounts that pay payments well below 1.7% and are therefore seeing the value of their nest egg gradually erode.

So what should savers look for?

Modify up to 5%

If you can store your cash for a while, a fixed-rate savings account is probably the way to go. This requires savers to lock up their money but guarantees a return.

The pace of interest rate cuts is expected to slow somewhat after the budget. This changing outlook, coupled with competition among banks vying for deposited cash, has led some providers to actually raise interest rates on new fixed-rate savings bonds.

At the time of writing, app-based Atom Bank was offering a six-month fixed rate bond paying 5% (minimum opening amount of 50), while ICICI Bank UK's SuperSaver Bond was offering 4.96% for a six-month period (minimum deposit of 1,000). .

However, one downside to a six-month account is that it doesn't take long to mature and you'll have to find a new home to store your money.

Since it is expected that there will be several cuts in the bank's base interest rate, it is generally common for the interest rate to be lower the longer the fixed interest rate is fixed.

But good rates are offered. On Thursday, Atom Bank offered a one-year fixed rate savings bond at 4.8%, a three-year fixed rate at 4.6%, and a five-year fixed rate at 4.5%.

Those looking to preserve profits must move quickly to secure the best deals while interest rates are higherAlice Haine, BestinvestEasy access to the best deals

Not everyone is willing or able to hold onto their savings for a while. Some need the flexibility that an easily accessible account provides.

The average rate has fallen from 3.15% to 3.03% since early August, when the bank last cut rates.

Competition between service providers means there are still decent rates out there, but Hargreaves Lansdown's Mark Hicks said Thursday's base rate cut would mean less generosity for some accounts.

And keep in mind that some Easy Access accounts have restrictions, such as limits on the number of withdrawals you can make.

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Last Thursday's Best Buy Easy Access accounts included the Atom Banks Instant Saver Reward, which pays up to 4.85%, and Coventry Building Society's Triple Access Saver (online), which pays 4.83% (5).

An Isa might be better

The annual Isa investment limit will remain at 20,000 until at least 2030, it was announced in the Budget. Tax-free cash Isas are now back in vogue as more and more people are facing an unwelcome tax bill for their savings. Any interest you earn is yours, but with a standard non-cash Isa savings account you may have to pay some tax.

With some non-Isa accounts still paying more than 5% interest, there are people who are not wealthy but have stashed away significant amounts of money and have reached the tax-free limit. This relates to the Personal Savings Allowance, which allows basic rate taxpayers to earn 1,000 in interest each financial year without paying tax, reduced to 500 for higher rate taxpayers.

So if you're looking to put money into your savings or switch providers and you're not using your Isa allowance at all or only partially, it probably doesn't make sense. Remember, you can sign up for multiple Cash Isas during a tax year, as long as you don't breach the overall maximum.

The Cash Isa market became competitive again last week, with top payment providers including app-based company Moneybox now offering a variable of 5.17% on balances over 500, according to Moneyfacts. However, if you withdraw more than three times a year, a lower interest rate of 0.75% applies.

Meanwhile, fixed-rate cash Isas pay up to 4.6%, with the highest rates typically available to those who tie up their cash for six or 12 months.

Savers are the ones who feel the power of interest rate cuts and, to make matters worse, there will be no increase in personal tax or savings allowances in the short term, making cash Isas increasingly attractive, says Rachel Springall of Moneyfacts.

Enjoy with premium bond

The bad news for UK premium bond holders is that their odds of winning the prize are about to get a little worse. And because premium bonds don't pay interest, they are more vulnerable to inflation than other savings.

But aside from the possibility of you winning big (which you probably won't), one thing they prefer is that any prizes you win are exempt from income and capital gains taxes. This may appeal to some people who worry about the tax bill on their savings and investments.

NS&I (National Savings & Investments) recently announced that it will reduce the ratio of premium bond prize money paid as prize money to the total investment amount from 4.4% to 4.15% next month. As a result, the odds of winning per bond number decrease from 21,000-1 to 22,000-1.

The total prize value last month was $461 million, but is expected to drop to $435 million next month. And realigning the prizes means fewer big prizes and a little more than 25 prizes.

Laura Suter of investment platform AJ Bell says that while the prize rate is effectively the average rate paid for a prize, there is no guarantee that you will actually receive a return as many bondholders, especially those with smaller amounts, are unable to receive the prize. Cash stored in bonds.

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