Savers are being encouraged to take advantage of high interest rates when interest rates are falling. According to Christian Peasgood of Hargreaves Lansdown, bank customers should take advantage of high interest rates before it is too late.
He explained: “Interest rates are unlikely to rise any further and banks are unlikely to wait to cut their rates, so locking in the rate now could get you the best deal. Fixed term products pay a fixed rate, meaning you benefit from the same interest rate for the duration of the fixed term while the rest of the savings market moves closer to inflation. However, there is no guarantee.”
The investment expert offered advice for those looking to get a fixed rate savings account before interest rates are cut. Mr Peaasgood added: “Remember that with fixed rate products you usually cannot withdraw your savings until the end of the term, so consider when you will need to access your savings before committing and make sure you have enough cash set aside in easily accessible savings for your emergency fund.”
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“If you are working, we recommend that you save three to six months of necessary expenses – if you are retired, it is one to three years.” The average fixed savings rate for one year is now 4.53 percent, down from 4.54 percent on the previous working day.
Interest from savings is paid to you tax-free and most savers pay no tax on the interest they earn. Basic rate taxpayers can earn £1,000 a year in interest tax-free, while higher rate taxpayers can earn £500. As interest rates have risen, as a basic rate taxpayer you will need around £19,000 in easily accessible savings at the best rates, or £18,000 at the highest fixed rates, to reach this allowance and soon start paying tax.
The average interest rate on easy access savings accounts is 3.11 per cent today, unchanged from the previous day. The interest rate on one-year fixed-term ISAs has fallen from 4.41 per cent to 4.39 per cent.