Cash savers urged: Hold out for further rate increases

Savers have been some of the few beneficiaries of the nail-biting economic turmoil of recent days, with interest rates on savings accounts rising to 4.5 percent over a few years for those wasting cash.

An increase in the key rate by the Bank of England to 2.25 percent last month is not expected to be the last – with predictions it could be raised to 6 percent next year to fight inflation.

This means that savings interest rates are expected to continue to rise.

One of the best new deals is a five-year, fixed-rate bond that pays 4.5 percent annually from United Trust Bank on a balance of £5,000 or more, according to the rates scrutinier Savings Champion. Another leading offer is 4.4 percent from online bank Zopa if you agree to set aside at least £1,000 over five years.

However, if interest rates continue to rise, it may not be wise to lock up your money for several years.

Hampshire Trust Bank offers a one-year bond with a fixed interest rate of 4 percent on deposits over £1. And if you’d rather give six months’ notice to access your money, Secure Trust Bank pays 2.6 percent on deposits from £1,000.

For those wanting instant access to their money, Charter Savings Bank is one of the highest paying 2.25 percent on balances over £5,000.

Anna Bowes, co-founder of Savings Champion, says: “The market is still expecting further hikes in key interest rates so that even better deals can be offered in the coming months and next year. The best buys on the market now reflect an expectation of interest rate hikes in the future.’

But with none of the deals approaching 9.9 percent inflation, savers will still see the purchasing power of their cash diminish.