Savers looking to lock in rates of 5% or more are advised to act quickly as these rates may disappear in the next few months or even weeks.
That is the recommendation from Mark Hicks, Head of Active Savings at Hargreaves Lansdown PLC (LSE:HL.), which operates a £134.8 billion retail investment platform.
"For savers keen to lock in 5% rates, they may only have a few more months, or even weeks to do so, so they should act fast," Hicks said today in a statement made in reaction to December's base rate announcement.
“The difference between easy access accounts and the top one-year fixed rate product is now extremely small at only 8bps, which is an all-time low since the BoE started its rate hiking cycle.”
In the wake of the Bank of England’s (BoE) decision to maintain the base rate of interest at 5.25% on December 14, the savings market has experienced significant shifts, according to Hicks.
The most notable change has been the continued decline in fixed rates, particularly for longer-dated products, with the one-year fixed rate dropping by over 40 basis points.
Despite this downward trend in fixed rates, easy access rates have remained relatively stable.
This has led to an all-time low differential of eight basis points between fixed rates and easy access since the BoE began its rate hike cycle.
Some of the best rates are now to be found in shorter-dated products, according to Hargreaves Lansdown.
The top one-year fixed rate in the market currently stands at 5.3%, while the leading easy access rate is close behind at 5.22%.
This narrow gap in rates suggests that savers earn almost the same amount of interest whether they choose to fix savings rates for a year or opt for an easy access product.
These market movements have been heavily influenced by future expectations of interest rate cuts in 2024 from central banks worldwide.
Future expectations, rather than the base rate itself, have led to the one-year rate falling by almost 40bp in less than a month, according to Hicks.
He anticipates that higher rates will eventually be offered for easy access products than for fixed rate savings products, and that the window of opportunity for locking in 5% savings rates is closing fast.