How to move your savings to a better rate

Before December gets to you – the fun, gift shopping, last minute Christmas rush and then the ‘aagh it’s here’ moment – give yourself a gift: put your savings in a better account.

That doesn’t sound like much fun – or particularly festive – but I think you have a little less than a week to do it or Christmas will start to derail you.

And you may notice that post-Christmas rates don’t look as good as they do now.

We are in the curious position that, while the Bank of England is expected to continue to raise key rates, it seems that savings and mortgage rates have already peaked.

This comes after rates skyrocketed in the wake of Kwasi Kwarteng’s ill-fated mini-budget, which handed out debt-financed tax cuts with reckless abandon, and led to a mini-financial crisis for Britain triggered by esoteric pension investments and UK government bonds.

As we know, that story ended with Kwarteng and his boss Liz Truss out, Jeremy Hunt and Rishi Sunak in, and tax cuts reversed in favor of tax increases in the fall statement.

A measure of restored stability and confidence has tempered expectations about high yields on government bonds, as UK bonds are called, and the Bank of England’s key interest rate.

As such, it appears that mortgage and savings rates have gotten way ahead of things – and have been falling in recent weeks.

This is good news for homeowners staring at mortgage rates above 6 percent, but bad news for savers.

It’s worth noting that with CPI inflation at 11.1 percent, there’s no chance you could beat this with a savings account.

But that doesn’t mean you shouldn’t try to narrow the gap, and as our savings expert Ed Magnus has shown, a two-year fixed rate now could beat future inflation if it falls as expected.

That’s a big ‘if’, but even if you think that the Bank of England, the Office for Budget Responsibility and government have probably gotten little better than absolutely useless at predicting inflation, you should still move your savings.

The savings rate is much higher than a year ago – and significantly higher than earlier this year.

A year ago the best deal for easy access paid about 0.75 percent, today it pays 2.81 percent. Meanwhile, the best two-year fix paid about 1.6 percent a year ago and stands at 4.75 percent today.

If you have money in an old bank or mortgage account, you probably earn much less than this. At worst, you’ll find yourself in what we call “insult bills,” the old savings deals that pay such abysmal interest that it’s an insult to even offer it.

When it comes to moving your savings, there are some important things to consider. I’ve listed them below, along with links to our independent best-buy tables.

And to stay up to date with the best deals as we offer them, sign up for our savings alert emails here.

Do you need easy access to savings?

If you need instant access to your savings, such as a rainy day fund, make sure the pot is in an easily accessible account. Some allow a limited number of withdrawals per year, others really easy access with no limits. You will sacrifice some interest for convenience, but it may be necessary. View our clear savings tables.

Do you want to fix your savings interest?

Flat rates are better than easy access and come in a variety of lengths, often one year, two years, three years and five years, as well as other terms. Most of them require you to lock your money for so long and you cannot access it. Keep in mind that if rates go up in the future, you could be locked into a deal with a lower rate. And remember, it’s not all or nothing, you could opt for some easy access and some different duration fixes. View our fixed interest savings tables.

Should you use a cash Isa?

Cash Isas protects all your interest from tax, which would otherwise eat up at a rate of 20 percent, 40 percent, or even 45 percent. The personal savings deduction protects the first £1,000 of interest from tax, but only for basic rate taxpayers. Higher rate taxpayers only have £500 and higher rate taxpayers get nothing. With rates rising and tax hurdles pushing up people’s tax brackets, more are being pulled into the savings tax net. Check out our cash Isa tables.

Should you use a savings platform?

One of the biggest risks to poor returns on your savings is losing track of old accounts scattered across multiple banks and building societies. Savings platforms get around that by letting you manage your money in one place. They don’t offer all the deals available, but offer rates that are in or around the best on the market. View our savings platform tables.