Surging interest rates bring misery to mortgage holders but for savers it means higher returns as banks are starting to pass on increases through saving rates.
Some savings accounts are now paying out some of the highest interest rates seen in decades and there are a number of different savings accounts available and suitable for a variety of circumstances.
Major lenders are now offering some of the UK’s top interest rates on savings accounts.
Customers with HSBC UK accounts will see some savings interest rates increase from this Friday, alongside a change to increase the higher-paying tier on the bank’s online bonus saver account.
Those with an online bonus saver will be able to earn 4% in interest on up to £50,000, whereas previously they were only able to earn this amount on up to £10,000.
Previously, those with £10,000 to £50,000 saved could earn 2.30% interest.
HSBC UK said the change meant customers could potentially earn up to around £680 more annually in interest.
There will also be an increase of 0.40 percentage points to 1.75% on non-bonus rate balances, where a withdrawal has been made in that particular month.
Meanwhile, First Direct, which is a division of HSBC UK Bank, has increased the rate on its fixed-rate saver account from 4.6% to 5% and will increase more rates on Friday, including boosting the rate on an easy access bonus account to 4% on balances up to £50,000.
Newcastle Building Society has launched a market-leading easy access account paying 4.30% AER variable – or annual equivalent rate – on balances from £1 to £250,000. It can be opened online or in branch with just £1 and allows unlimited withdrawals, which is ideal for those planning to dip into their savings often. The account is also moneysavingexpert’s standout pick.
Looking at the bank arms of the big UK supermarkets, Sainsbury's Bank pays 4.01%, but there is a limit of three withdrawals a year, while Tesco Bank offers 4% with unlimited withdrawals.
Savings and investment app Chip has upped its instant access savings rate to 4.21%. Leeds Building Society offers 4.20% for a minimum deposit of £1,000 if you open the account online.
For those who are sure will not need to dip into their savings anytime soon, fixed rate savings accounts offer an even better deal for your money.
These accounts enable savers to lock in an interest rate for a set length of time but usually customers can’t withdraw their money until the end of the term.
Allica Bank currently pays the top six-month rate at 5.17% (min £10,000), or if you've less to save, Atom Bank pays a slightly lower 5.15% (min £50).
For a slightly longer fix, Atom Bank's nine-month fix pays 5.25%, according to analysis from moneysavingexpert.com.
Topping the list of one-year fixes is Vanquis Bank, which offers 5.9% for a minimum of £1,000, followed by SmartSave, which offers 5.86% for those with a minimum of £10,000. Atom Bank pays 5.85% on a minimum of £50.
For two-year fixes, Vanquis Bank’s Two Year Fixed Rate Bond comes out on top with an AER of 5.9%. The account can be opened with a minimum deposit of £1,000 and interest can be paid either annually or monthly on the anniversary date. Withdrawals are, however, not permitted throughout the course of the term.
Currently, the difference in interest between fixed-term accounts ranging from one to five years is so small that there really isn’t an incentive to lock in for longer right now.
But savers can earn 6% interest from four-year and a five-year fixed rate deals offered by JN Bank.
The Brixton-based bank said accounts can only be opened online and savers will need a minimum deposit of £1,000 to get started. The maximum deposit is £100,000.
JN Bank is the first Caribbean bank to be authorised in the UK and launched in October 2020.
Challenger banks Chase and Monzo also upped the rates on their instant access linked savings accounts.
Monzo customers saw the linked easy-access rate rise from 3.4% to 3.7%. From 3 July, Chase's 1.6 million UK banking customers will see the rate rise on its linked savings account from 3.3% to 3.8%.
Banks are now offering better deals after being accused the chancellor of “taking too long” to pass on increases in interest rates to savers, the chancellor has claimed.
Jeremy Hunt said people with instant access accounts were being particularly hit by the "issue that needs solving".
Latest figures show the gap between average mortgage and savings rates is wider than it was in December 2021, when the Bank of England first starting increasing interest rates in its battle to slow the speed of rising consumer prices.
Hiking savings can benefit savers as they try to navigate the cost of living crisis amid sticky inflation, according to Shore Capital.
“Firstly, it benefits customers who may be struggling as a result of the cost of living crisis by boosting their incomes,” Shore Capital analysts said.
“Secondly, it helps in the fight to reduce inflation by ensuring the impact of higher base rates is fed through to depositors thus encouraging saving and reducing spending.”
AER interest represents the actual return on your savings when interest is added to the account more than once a year.
By comparing AER rates across different savings accounts, you can identify the accounts that offer the highest returns on your investment. The higher the AER interest, the faster your savings will grow
Money in all the accounts mentioned is protected up to £85,000 per person, per financial institution, regardless of being a high street lender, challenger bank of online app.
Watch: Age-old complaint about savings rates is down to you rather than bank bosses