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100 months of record low interest rates: where should savers turn?

Written by: Paloma Kubiak
The Bank of England first cut the base rate to below 1% in March 2009 and July marks the 100th month of record low interest rates. Where can beleaguered savers turn for returns?

Having stayed at 0.5% between March 2009 and July 2016, the base rate was then chopped to 0.25% in the aftermath of the Brexit vote. Since August 2016, the base rate remains unchanged, meaning next month marks 100 months of record low rates.

And with rising inflation (2.9% in May), coupled with weak wage growth, savers’ money needs to work harder than ever to get a decent return.

Rachel Springall, finance expert at Moneyfacts, said: “Savers are in a dire situation where it’s becoming so difficult to get a decent return on their investment. In addition, inflation is set to rise further and that will only erode the spending power of consumers’ hard earned cash. This is why it’s vital for savers to chase down the best possible returns and not leave their money languishing in an account with a poor return.”

The top cash savings accounts

The rates on offer vary between easy access, current account, notice accounts and fixed savings products. These are the best buys on the market according to Moneyfacts data:

Fixed savings:

The best buy one year fix deal is offered by Al Rayan Bank where it pays 2.02% AER (minimum £1,000 investment). This is a Shariah-compliant account which pays the expected profit rate of 2.02%. Under Islamic finance principles, savers aren’t allowed to earn interest so an expected profit rate is quoted instead, though it’s not guaranteed.

If you can tie your money up for 18 months, Al Rayan pays an expected profit rate of 2.06% AER. It also comes top of the two-year fixed tables with an expected profit of 2.11% AER.

In the three-year fix category, the Bank of London at The Middle East (BLME) pays an expected profit rate of 2.25% AER but it comes with a steep £25,000 minimum investment. Digital challenger, Atom offers 2.20% AER but has a minimum £50 investment level. Alternatively, the NS&I three-year bond also pays 2.20% but has a starting level of £100.

If you’re looking to tie your money up for longer, Atom Bank pays 2.40% AER on its five-year bond offering.

Easy access:

Like the name suggests, easy access accounts allow savers to withdraw their cash without penalty. The current best buy is offered from the Bank of Cyprus UK – 1.11% AER on a minimum £1 investment. See’s ‘Should I entrust foreign banks with my savings?’ for more information. Alternatively, Yorkshire Building Society  pays 1.10% AER on a minimum £100.

Notice account:

With these products, you’re required to give the bank or building society notice that you want to access your money. The time periods can vary. Paragon Bank pays 1.45% AER on its 120-day notice account. Hampshire Trust Bank offers 1.40% on its 90-day notice account.

Regular savings:

These accounts are aimed at people who are looking to get into the savings habit by contributing a lump sum each month for a set period of time. If you do need to access your money, they often come with interest penalties. Saffron Building Society pays 3.5% AER on its 12-month bond. In second place is Kent Reliance’s 3% one-year bond.

High interest current accounts:

Some banks offer a high rate of interest for savers who tend to have a higher balance. It often means having to switch your current account to the new provider, and you often have to meet certain criteria such as minimum monthly pay in or set up a minimum number of direct debits.

The Nationwide Building Society’s FlexDirect pays 5% AER (for the first 12 months) on up to £2,500 as long as you pay a minimum of £1,000 each month. The TSB Classic Plus account pays 3% AER on up to £1,500 as long as you deposit £500 a month and register for internet banking, paperless statements and correspondence. These savers can also earn up to £10 cashback a month too. Alternatively, Tesco Bank also pays 3% AER. It has a minimum £750 per month requirement and savers need to set up at least three direct debits.

Buying your first home?

If you have a savings goal in mind, such as buying your first property, you may want to consider the Help to Buy ISA or Lifetime ISA, both offering a 25% government bonus on savings. See’s Help to Buy vs Lifetime ISA guide for further details.

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