Key Takeaways:
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Bank of England keeps base rate at 5.25%, impacting savings and mortgage rates.
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Average savings rates are falling, but some providers offer competitive deals.
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Experts urge savers to switch accounts for better returns and tax efficiency.
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Fixed-rate bonds and ISAs provide stability amid economic uncertainty.
Savers Must Act Now as Interest Rates Remain Frozen
The Bank of England (BoE) has held the base rate at 5.25%, leaving savers with tough decisions as returns on cash deposits continue to decline. While some banks have cut savings rates, others are launching new fixed-rate bonds and ISAs—making it crucial for savers to review their options to avoid poor returns.
Why Savers Should Switch Now
Rachel Springall, finance expert at Moneyfactscompare.co.uk, warns:
*”Loyalty doesn’t pay. Savers must proactively check rates and move their money if they’re earning a poor return. High street banks pay as little as 1.56% on easy-access accounts—far below inflation.”*
Key stats:
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Average easy-access savings rate fell from 2.79% (May) to 2.72% (June).
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Easy-access ISA rates dropped from 3.03% to 2.98%.
Best Savings Alternatives
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Challenger Banks & Mutuals – Often offer higher interest rates than traditional banks.
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Fixed-Rate Bonds – Lock in competitive rates before further declines.
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Yorkshire BS: 4.00% (1-year), 4.05% (2-year).
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Skipton BS: 4.50% easy-access with a 12-month bonus.
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Cash ISAs – Protect savings from tax with rates up to 4.10%.
Tax Efficiency: Don’t Overlook Your PSA
Alice Haine, Bestinvest analyst, highlights:
*”Basic-rate taxpayers can earn £1,000 interest tax-free, but higher-rate taxpayers only get £500. Savers should maximise ISAs (£20,000 allowance) and pensions to reduce tax bills.”*
Mortgage Holders: What the Rate Hold Means
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1.6 million fixed-rate mortgages expire in 2025.
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Lenders may still cut rates slightly, but borrowers should secure deals early.
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Experts suggest reviewing options six months before your deal ends.
The Bottom Line
With savings rates trending downward, now is the time to:
✅ Switch to higher-paying accounts
✅ Consider fixed-rate bonds for stability
✅ Use ISAs to shield savings from tax
