British households are always looking for ways to make their money grow further amid the cost of living crisis, and savings accounts can help.
After years of low interest rates, high-yield savings accounts are having a moment as the Bank of England has kept interest rates at a 16-year high of 5.25%. While homeowners face higher mortgages, there is a silver lining in higher borrowing costs and consumers can now find UK savings accounts that are above inflation.
According to figures from the Office for National Statistics (ONS), British inflation reached 2% in May for the first time in almost three years.
Savers should shop around to find the best deals and check their interest rates, as they could still be stuck with a product that can’t beat inflation.
The most important factor to consider when choosing a savings account is the difference between easy access and fixed term.
Read more: British interest rates remain at a 16-year high ahead of the election
With easily accessible accounts, you can access your money when you need it. As the name implies, these are fixed-term accounts where you do not have access to your money for the life of the deal. They usually offer better rates, but you should be comfortable with not touching your savings for a long period of time, usually between one and five years.
What are the best high interest fixed rate accounts?
The best fixed rate account currently offers 5.22% and is available from Oxbury.
The six-month fixed rate offer requires a minimum of £1,000 and you can invest up to 500,000. Withdrawals are not allowed during the term of the deal.
Vanquis offers 5.21% for one year with similar terms. The fixed-term personal savings account requires a minimum amount of £1,000, which must be blocked for 12 months. You can invest a maximum of € 250,000. Withdrawals are not allowed during the term of the deal and you can only access it online.
Access Bank used to have the best paying offer, but is now number three, with a one-year fixed rate paying 5.20%. A minimum of €5,000 is required and you can invest a maximum of €500,000. Withdrawals are not allowed during the term of the deal.
Online banks typically offer higher rates than traditional brick-and-mortar branches, which translates into better returns, helping you save and achieve your financial goals more efficiently.
If you prefer to go with a household name, the major lenders have slightly lower offers, but are still above inflation.
Barclays (BARC.L) offers the highest interest rate among the major lenders, with a one-year fixed-rate savings account paying out 4.65%. The requirements are not too strict, with a minimum required balance of £500.
Read more: Best UK mortgage deals of the week
Metro Bank isn’t far off with an interest rate of 4.61% and similar terms. The account has a fixed term of one year and the minimum you must deposit is €500.
Lloyds (LLOY.L) has a fixed rate savings product that offers 4.35% for one year. However, the minimum deposit is £3,000 and you must have or open a Lloyds current account or other savings account to qualify. For new customers the interest rate is 4.15%.
How do savings accounts with a fixed interest rate work?
Unlike easy-access savings accounts, where interest rates can vary, fixed-rate accounts earn a fixed interest rate for the period you choose, whether that’s six months or one, two, three or even five years. These are the most common deals, but some offers are valid for 10 years and older.
You must leave your initial deposit for a fixed period of time without making any withdrawals. If you touch your money, you lose all interest.
What are the best easy-access savings accounts?
The easy-to-access savings accounts allow you to withdraw your money without notice. That convenience comes with lower interest rates, but they’re a good option for those who think they might need their money quickly.
Read more: When will interest rates fall and what should you do?
Keep in mind that the rates on these accounts are variable, meaning they can go up or down. You will be informed in a timely manner of any changes.
Ulster Bank has the best paying offer for easy access accounts at 5.20%, but you’ll need at least £5,000 to open the account.
Chase has the second highest offer at 5.10%. You don’t need a minimum amount to open the account and you can invest up to £1,000,000.
Flagstone pays 5.07% with an easy-to-access account that pays interest daily. The account is offered through SmartSave and can be opened via mobile banking with a minimum deposit of £10,000.
There are even higher-paying, easy-to-access accounts, but they aren’t for new customers. For example, Santander (BNC.L) Edge Saver offers 7%, but is only for current account holders.
Read more: What does the UK General Election mean for your finances?
Skipton Building Society pays 5.5%, but again the deal is only available to mortgage holders or those who had a savings account with the lender before January.
What are the best cancellation savings accounts?
Can’t decide whether to put your money away and not touch it for a long time or keep it accessible at all times? Perhaps you should consider a cancellation savings account.
With a savings account, you must notify your savings provider before you can withdraw your money.
These are ideal for those who know when they need their money but don’t want the temptation to dip into it at any time.
You must give the bank or building society a certain amount of advance notice before you can withdraw your money – usually between 30 and 120 days.
Vanquis has a 90-day offer that pays 5.35%, currently the best offer on the market. You need a minimum of €1,000 to open it and you can deposit a maximum of €250,000.
Monument has a notice account with a 60-day notice period that pays 5.27%. This means that as long as you give the lender about two months’ notice in advance, you can access your money without penalties. To apply, you will need between €25,000 and €2,000,000.
Investec (INVP.L) has a 90-day notice account that pays 5.25% after three months. To apply, you will need between €5,000 and €250,000.
Read more: What is shared ownership? A guide that breaks myths
Interest rates with notice accounts are variable, meaning they can increase or decrease over time.
What are the best regular savings accounts?
For those who want to get the most out of their savings, regular savings accounts offer a return of up to 8%.
Most regular savings accounts require you to put money aside every month with annual interest. It is not unusual for the offer to only be available to current customers.
Principality offers 8% on a regular six-month savings account, for which you simply open an account with them and pay up to £200 every month. Interest is calculated every day on the money in the account and is paid out six months after opening.
For existing customers, First Direct offers 7% for one year and allows a maximum monthly deposit of £300. It is not allowed to skip months, whereby a minimum of € 25 must be deposited into the account every month.
You cannot withdraw money without penalty and if you close the account before the twelve months are up, the interest rate drops to 2%.
The Co-op bank has a 7% deal for existing customers. With a fixed term of one year you can save up to € 250 per month and skip months without penalties.
Nationally, the country previously had a market-leading supply of 8%, but that has now fallen to 6.5%. Nationwide’s deal is a regular savings account, available exclusively to customers with current accounts.
For all the offers mentioned above, you can simply open an account to access the deal.
Saffron BS pays 8% in a limited Members’ Month Loyalty Saver deal, but you must have been a member since June 1, 2023 to qualify.
Skipton Building Society offers 7% but is limited to customers who joined before January 2024.
Every deal mentioned here is covered by the Financial Services Compensation Scheme, so you’re protected up to £85,000.
Watch: Martin Lewis’s simple Amazon hack can help you save hundreds of pounds when shopping online
Download the Yahoo Finance app, available for Apple And Android.