Savings rates had a huge upward swing in 2023 - but experts think 2024 might see an end to dramatic rate increases.
This year has been good for those with money to squirrel away, largely because Bank of England base rate hikes have meant higher savings rates.
In January base rate was 3.5 per cent.In mid-December, the Bank of England opted once to hold the base rate at 5.25 per cent for the third time in a row.
In recent months, forecasts for where the base rate will peak have fallen from a high of 6.5 per cent to the current 5.25 per cent level.
The fact that inflation fell to 3.9 per cent in the 12 months to November may be another sign that 5.25 per cent is the peak of this interest rate cycle.
That said, inflation remains well above the Bank of England’s inflation target of 2 per cent.
We asked savings experts what they think will happen to savings rates in 2024. The jury is unanimous that savings rates will fall, but certain accounts will fall more than others.
What's next: Savings experts believe rates will dip next year, but some deals will stay healthy
Sarah Coles, head of personal finance at Hargreaves Lansdown, believes that interest rates will fall in 2024, but slowly.
She says: ‘To keep this extra inflation under control, the Bank of England is going to need to keep an iron grip on interest rates. The Office for Budget Responsibility expects that even by the end of its forecast in 2028/29, rates will still be at 4 per cent.
‘The jury is out on when the first rate cut might hit - with a spread of forecasts between the spring and winter next year. On balance, cuts are unlikely until at least the summer. Even when the Bank of England does cut rates, we’re expecting them to come at a glacial pace, because the Bank will be hyper-focused on inflation risks.’
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- Best easy access savings rates: Top online and branch deals in our tables
We have already seen the fixed-rate market fall in recent weeks.
Previous headline-grabbing deals, like , have all but vanished. The best one-year fixed-rate account on the market now pays 5.66 per cent, from Metro Bank.
Data from rate scrutineer Moneyfacts shows that fixed-rate bonds and Isas suffered the biggest month-on-month fall in a decade.
Coles says: ‘Savings rates peaked a while ago, and have been falling gradually for weeks, as the market digests the fact that we’re unlikely to see any more Bank of England rate rises in this cycle.
‘2024 is likely to bring more of the same but we’re unlikely to see a huge watershed moment when savings rates are cut. Instead, we expect to see them slowly drift south throughout the year.
Andrew Hagger, founder of personal finance website MoneyComms, says: ‘A few weeks ago the school of thought was that we'd see a maximum one or two 0.25 per cent rate cuts towards the end of the second half of 2024, however it seems that this may have been a little cautious and with an upturn in global economies there's a chance we could see base rate fall from 5.25 per cent to 4.25 per cent by December 2024, but this is by no means certain.'
Fixed-rate accounts and Isas
Experts believe fixed-rate accounts and cash Isas will be the first accounts to see significant rate cuts in the New Year.
James Blower, founder of money website Savings Guru, believes these deals are likely to continue to fall back in 2024, with the best fixed-rates likely to ease back in to the low 5 per cent range.
He says: ‘Expect one year fixed-rate best buy rates to fall to around 5.2 to 5.3 per cent early in the New Year.
‘The base rate is likely to fall to 5 per cent, and possibly 4.75 per cent, during 2024 as the Bank of England has indicated that base rate has peaked.
Hagger says: ‘Fixed rate bond rates are already on a downward trajectory and I expect more of the same over the next 12 months, with best one year fixed rate bond deals below 5 per cent by year end.’
Easy-access and notice accounts
James Blower believes that easy-access rates are likely to remain around 5 per cent for most of next year but fall back towards the end of 2024.
Hagger adds: ‘Any base rate cut will be pretty much mirrored by easy-access savings accounts, so don't be surprised to see best buys well below 5 per cent by the end of next year.'
If this does happen, Blower points out that notice accounts are a very good option to savers who can afford to lock funds away.
These deals pay up to 5.58 per cent, from United Trust Bank.
Banks need to give 14 days notice plus the notice period as advanced warning to customers – so a saver using United Trust’s 200 Day Notice account will get 214 days of the current 5.58 per cent interest rate before any rate cut takes place.
That means even if United Trust Bank cut their rate next week, existing savers will get the current 5.58 per cent rate until at least August next year.
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