Experts reveal four savings trends for 2024: from Isas to Premium Bonds

It's been a great year for savings rates, with deals booming throughout the year, even if there has been a downturn in the past month.

The Bank of England raised its base rate 14 times in a row between December 2021 and September 2023 before deciding to keep it at 5.25 percent, where it had remained for the past three months.

Since the decision to maintain the base interest rate, savings interest rates have fallen, especially when it comes to fixed deals.

From a cash Isa explosion to the launch of cash platforms, we asked savings experts for their predictions for the savings market in 2024.

1. Cash is a tree

Earlier this year, a report from the Bank of England revealed that cash Isas saw the biggest inflows at the start of the tax year since Isas were launched in 1999.

Savers funneled more than £3 billion into Isas in July – the highest inflow for July since 2014.

In the first three months of the 2023 tax year, savers deposited more than £9 billion into cash Isas – the biggest inflow since Isas were launched in 1999, and the first time the balance has been positive since before the pandemic.

Savings experts predict there could be even more competition in the cash Isa market by 2024.

Andrew Hagger, founder of personal finance website Money Comms, said: 'There could be more competition in the cash Isa market, with the government letting you have multiple Isa plans from April 2024.

If you currently open a Cash or Stocks & Shares Isa with one provider, you will have to stay with them for that tax year, but next year you are free to switch, so this could lead to better rates on tax-free savings accounts.

Hagger continued: 'Isas will be popular again because even if interest rates start to fall, many savers will be at risk of exceeding their annual personal savings allowance (PSA).

'Even with a 4 per cent savings rate, someone with £25,000 will reach the £1,000 limit for standard rate taxpayers within a year – when rates were around 1 per cent you would have needed a six-figure savings pot to avoid the danger to walk that you would cross the border. the PSA threshold of £1,000.

'It is possible that Labor will return to power for the first time since 2010 and so we will have to wait and see whether it decides to change rules and limits around PSA and/or Isa savings.'

James Blower, founder of the website Savings Guru, said: 'I think we will continue to see strong interest in cash Isas.

'Because new subscriptions are only beneficial for savers with very high savings balances and some niche groups of savers, they have become more important for savers with even relatively small savings balances.

'We will certainly see more people caught out by the rate hike and the PSA not covering their interest earned, and turning to cash Isas as a result.'

2. NS&I interest rate cuts

Savings experts also predict that NS&I interest rate cuts are on the horizon in 2024.

The Treasury-backed bank recently announced it has achieved its fundraising target for this year with a surplus of £2.3 billion, bringing in £9.8 billion from savers in the past six months .

In the autumn statement, the government did not change the target for the amount NS&I wants to raise in the current tax year – freezing this at £7.5 billion.

NS&I has withdrawn its best ever guaranteed bonds, which paid a bumper interest rate of 6.2 percent, and cut the interest rate on its Green Savings Bond. Now experts think it's highly likely that other accounts will also run into trouble.

James Blower says: 'NS&I is difficult to predict because NS&I's year end is not until March 31 and we probably don't know much yet about what their target for the next financial year is, so that makes it difficult to call on this point.

'However, at this time I do not anticipate any increased need for funding from them and I believe their rates will be maintained until the end of their financial year and I can foresee reductions in 2024/2025 when rates generally fall.'

While Andrew Hagger says: 'Any reduction in base rates will be virtually mirrored by easy-to-access savings accounts, so don't be surprised if the best buys are well below 5 per cent by the end of next year.

'It could also lead to a cut in NS&I products, but that depends on what the new funding figure will be from April next year.'

3. Growth of the cash platform

In recent months, a range of providers have launched savings platforms, including over-50s specialist Saga, Savings Champion and Charles Stanley.

Because the highest savings rates change quickly throughout the year, getting the best deals takes time and prep work.

Savings platforms have grown in popularity as they are seen to take the work out of staying on top of the best savings accounts. They are websites that allow you to maintain multiple savings accounts in one place.

The advantage is that you can hold multiple savings accounts with multiple providers in one place, accessible via one portal.

James Blower believes cash savings platforms will continue to grow in 2024.

He said: “I expect Bondsmith to have a strong year and ultimately look to rival the two biggest platforms, Hargreaves Lansdown Active Savings and Flagstone.

'One to keep an eye on could be Aviva Save. Its performance is terrible compared to HL and Flagstone, while it has all the features to rival them. I think it can be completely renewed as a serious competitor in 2024, or the opposite: Aviva withdraws from the market completely.'

Head to head: Savings experts say NS&I's 6.2% interest rate has thrown the one-year fixed rate bond market out of balance

4. Fixed-interest accounts lose their attractiveness

Savers have enjoyed some of the best rates on fixed-rate accounts since 2008.

Earlier this year, NS&I launched a blockbuster 6.2 per cent one-year fixed rate bond, but it was withdrawn after five weeks and the one-year fixed rate bills never reached the same high. Many experts believe that this marked the peak of the one-year fixed rate market.

Mark Hicks, Head of Active Savings at Hargreaves Lansdown said: 'NS&I was a dominant force in the second half of the year and disrupted the market in September by artificially holding up the savings market with their 6.2 per cent fixed rate offer one-year bonds.

“Given the significant amount of deposits raised during September, we do not expect any further aggressive moves to the top of the market in the near future and into 2024.”

As the gap between easy-access accounts and one-year fixed-rate accounts narrows, and experts expect easy-access interest rates to hold, savers may see little point in putting their money away.

The difference between these accounts is now only 0.5 percent, while the fixed interest rate continues to fall.

James Blower says: 'The strong growth in fixed rate bonds will slow in 2024 as fixed rates fall and move closer to parity with easily accessible rates. Savers will decide that it is not worth putting their money away because there is little or no premium for it. So.'

The best one-year fixed-rate account currently pays 5.7 percent interest, and savings experts expect this rate to continue to decline through 2024.