Despite multiple recent base rate rises, we have long been told that an easy-access savings account will not provide favourable returns.
But this may no longer be the case, according to recent research, it has been has revealed that you can now earn up to 3.35% interest in easy access accounts, four times higher than last year.
Lucinda O’Brien, personal finance expert at Money.co.uk Savings, has given her insight into what 2023’s easy access rates mean for savers:
“Easy access savings accounts are paying people far more than they have in years, as banks finally boost interest rates. This type of savings account provides a flexible way to build up a savings pot. Most accounts allow you to withdraw or deposit without penalties, and you still get the benefits of interest. That means there’s no incentive at all to leave money sitting in a low-rate account – as you can shift to a more rewarding offer whenever you see one without paying a penny to do so.
“Bear in mind that there are instant and easy access accounts, which are often mentioned together but have slightly different terms and conditions, so always check all the details before signing up. These accounts are ideal for people who have a short-term savings goal, but still want to earn interest. However, in recent years those rates were so low it meant other options became more favourable.
“In February 2022, the average interest rate for an easy access savings account was 0.43% and the maximum interest rate was 0.75%. This meant if you had £1,000 in your account you would have earnt less than £1 interest a month, which is hardly the attractive bonus savers are seeking. Thankfully, times have changed and rates have increased measurably.
“We compared the rates from February 2022 to February 2023 and at the time of writing, the maximum interest rate for an easy access savings account stands at 3.35%, with the average interest rate at 1.93%. This means rates are now four times higher than last year. These averages look at all easy access accounts that include a minimum deposit of up to £5,000, excludes children savings accounts and are open to any savers.
“The Yorkshire Building Society Online Rainy Day Account Issue 2 is currently offering the top interest rate at 3.35%, but there are some details to note. This interest rate can only be achieved on deposits up to £5,000, so if you have more savings the rate will decrease. Plus, you can have unlimited withdrawals, but only on two days every year. That being said, it’s still an attractive deal as if you added £5,000 to the account then you would get an annual interest of £168 (before tax).
“Elsewhere in the market, Paragon Triple Access Account (Issue 11) is offering a virtually market leading rate at 3.1% and this savings account can be opened with just £1 and allows deposits of up to £500,000. This interest rate means that if you have £10,000 in the account you could earn an annual interest of £312 (before tax). The account can also be easily managed online and you can choose between monthly or annual interest payments. Unlimited deposits are available, but you only get three withdrawals every 12 months at this interest rate.
“These rates are competitive for easy access accounts and hopefully it means the low rates of last year are behind us, but it’s always worth exploring all your options as higher rates can be found in the likes of fixed-rate bonds. These are a far less flexible option, but if you are happy to lock your money away for a period of time then you could get more interest. For example, if you don’t need to access your money for a year, you could earn 4.2% on your savings with a 1-year fixed-rate bond.
There are many options available for savers and with easy access rates on the rise, [which] means flexible and accessible saving just became more attractive.”
Vicky Parry from MoneyMagpie suggests that “we always keep an eye on the figures” and “to always do our research. We all need an easy access pot of money for life’s little emergencies. So this type of account is often the best option. However, don’t get complacent and put it all in the same pot – there are far better options available in terms of interest. We have a handy guide to savings apps here and Five ways to grow your money without a savings account here. So, while an easy access savings account is improving, if these figures still don’t excite you, then don’t forget there are always options”