When will interest rates rise for savers?

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Interest rates on UK savings accounts saw a rapid rise in 2023, after the base rate peaked at its highest level since 2008, and it was a similar story in mainland Europe, with savings rates gradually increasing in 2023 following eight long years of ECB-set negative interest rates. 

In the last few months though, we’ve seen savings rates in the UK slowly level off again, as the base rate has held steady and inflation dipped to 3.9%. So, what’s next for the UK? We look at the savings rate forecast for 2024 and beyond.

Key takeaways
  • Savings rates in the UK are linked to the base rate, set by the BoE

  • Typically, banks will ‘pass on’ these rate rises to consumers, but at times they have been slow to do so

  • While this has been good news for savers, those on tracker rate mortgages have seen their payments increase monthly for nearly two years

When will interest rates rise for savers?

Interest rates have been steadily rising over the last 18 months for savers. In March 2022, the highest 1 year fixed rate bond on the market was at 1.71% AER. By October 2023, the highest 1 year rate was 6.20% AER. This has led to many people asking what they can expect in terms of savings interest rate predictions.

The consensus forecast suggests that savings rates in the UK are likely to remain relatively high for the next 12 months, but as of the start of 2024, we've seen rates over 6.00% AER start to disappear.

Savings account interest rate predictions 2024

The savings rate forecast in the UK for the next 12 months is for it to remain broadly stable, according to a consensus of analysts from major banks and financial institutions.

The savings interest rate prediction is based on a number of factors, including:

  • The BoE’s base rate, which is currently 5.25%
  • Inflation, which is currently 3.9%
  • The cost of living crisis, which is putting pressure on household budgets
  • The overall state of the UK economy, which is expected to slow in the coming months but avoid a recession

The forecast also takes into account the fact that savings rates have been rising steadily in recent months, as banks have competed to attract savers’ deposits. It is important to note that the savings rate forecast is just that – a forecast. It is impossible to predict with certainty what will happen in the future.

When is the next interest rate decision in the UK?

The next interest rate decision is on 1 February 2024.

The MPC reviews and announces the base rate eight times a year (approximately every six weeks). You can view the upcoming dates for 2024 on the BoE website.

Best savings rates 2024

The best savings account for you will depend on your personal circumstances and how much flexibility you will require. However, some of the highest interest rates can be found on fixed rate bonds. Regular savings accounts often also offer tantalisingly high interest rates, but these come with restrictions, like the amount of money you can deposit per month.

Will UK savings interest rates go up or fall in 2024?

The direction of UK savings interest rates in 2024 will depend on a number of factors, including inflation, interest rates, and economic growth.

The BoE expects a sharp slowdown in inflation in 2024. If inflation continues to fall, the BoE will be able to start cutting interest rates, likely leading to lower savings interest rates. Some economists expect that the BoE will not raise interest rates further, but will not be in a position to cut rates until late 2024.

Economic growth is another important factor that will affect savings interest rates. If the UK economy experiences a recession, banks may be less likely to offer high interest rates on savings accounts, as they will be more focused on lending money to businesses and consumers rather than attracting deposits.

Overall, it is difficult to say definitively whether UK savings interest rates will go up or fall in 2024. However, it is likely that they will remain relatively high, as the BoE is trying to bring inflation under control.

Should I fix my savings now or wait?

Whether or not you should fix your savings now or wait depends on your individual circumstances and financial goals. It’s also almost impossible to predict the exact moment at which you should fix your savings with no risk that a higher rate will come along.

Currently, though, interest rates on savings accounts are relatively high. Fixing your savings will guarantee you a fixed interest rate for the duration of the term, regardless of what happens to interest rates in general. This makes longer-term savings accounts, for example 2 or 3 year fixed rate bonds, an attractive option for savers who believe that the current high rates won’t be available in 2025 and beyond.

Another thing to consider is how long you plan to keep your savings fixed. If you know you’ll need access to your money in the short term, then fixing your savings for less than a year may be a good option for you. However, if you are saving for a long-term goal, such as retirement, then you may want to consider fixing your savings for a longer period of time. This will give you more certainty over how much interest you will earn over the long term.

Ultimately, the decision of whether or not to fix your savings is a personal one. There is no right or wrong answer, and the best decision for you will depend on your individual circumstances and financial goals.

Saving with Raisin UK

Regardless of what happens to the savings interest rate, there’s never a bad time to save. To find the best savings account for you and compare interest rates on savings accounts, register for a Raisin UK Account and log in to apply.