Boost for savers as rates rise to highest levels in nearly a decade

The average rates being offered on some savings accounts have reached their highest level in nearly a decade, according to analysis of the market.

At 0.84%, the average easy access rate is at its highest since a rate of 0.87% was recorded in December 2012, Moneyfacts.co.uk said.

A year ago, in September 2021, the average easy access rate was just 0.17%.

Savers can typically get higher returns from an easy access Isa, which currently pays 0.92% on average and stands at its highest point since September 2019 (when the average rate was 0.93%).

And if they are able to lock their money away for a year, they could typically find a rate of 2.29% by taking out a one-year bond, which has hit its highest average rate since November 2012.

The average one-year fixed Isa meanwhile has a rate of 1.96% – the highest point since January 2013.

With the Bank of England recently increasing interest rates and further rises expected, the choice of savings products is also growing.

Moneyfacts counted 1,754 savings deals, including Isas, the highest total since early on in the coronavirus pandemic in March 2020, when 1,768 deals were available.

Despite the growth in average savings rates, cash savers will still find their returns wiped away by the impact of surging living costs, with Consumer Prices Index (CPI) inflation hitting 10.1% in the 12 months to July.

However, rising savings rates will at least go some way towards offsetting the eroding impact of inflation on savers’ cash.

Rachel Springall, finance expert at Moneyfacts, said: “The average one-year fixed bond arena remains extremely competitive, with the average return breaching 2% for the first time in a decade.

“Product choice across the savings spectrum also improved, getting closer to levels not seen since March 2020.”

She continued: “The back-to-back base rate rises have had a positive influence on variable savings rates, and this, along with notable competition, has seen the average easy access rate rise to its highest level since 2012.”

But she added that not every account has improved, so it is vital that savers compare their existing accounts and take advantage of the current competition.

Ms Springall also pointed out that, while some savers may be looking to chase after fixed rates in the coming months, others may need the flexibility of being able to withdraw their cash to cover rising living costs.

She added: “To attract savers, providers will need to respond quickly to compete with their peers and offer a range of products to suit specific needs.”