Alex Sitaras, Head of Savings and Partnership Products
18 December 2024
As a saver myself, I understand how frustrating falling interest rates can feel – especially after years of rising costs and economic uncertainty. And while it might not feel like the most positive start to 2025 for savers, I’m here to show you that just because interest rates are falling, it doesn’t mean our savings need to suffer.
At Skipton, we’re dedicated to helping you make more of your money. That’s why today I’m looking at what lower rates mean for your savings, as well as my practical tips to navigate these changes – including how a free chat with one of our savings specialists could be a conversation worth having.
Why are interest rates falling?
If you’re feeling confused by the latest shift in interest rates, you’re not alone. It’s been a rollercoaster few years. Here’s a quick recap:
- In 2020 and 2021 the Bank of England lowered the base rate to a historic low of 0.1% to support the economy during the pandemic.
- In 2022 the Bank of England began to raise rates sharply to tackle soaring inflation (the rising cost of living). Base rate peaked at over 5% in 2024.
- While this increased borrowing costs for mortgages and loans, it was good news for savers who saw better returns on their savings accounts.
- We’re now at a point where inflation is easing, and the Bank of England has started cutting rates again.
It’s widely expected that interest rates will continue to fall over the course of 2025, meaning the generous returns we’ve seen on savings accounts may begin to disappear soon. But even though rates are falling, there are still plenty of ways to keep your money working hard.
Here are my top four tips on staying ahead of the game in a lower-rate environment.
1. Making sure your money is in the right place
Your first move should be to look at where your money is currently held and whether it’s in the best possible place for your goals. This is a great way to get as much value as possible out of your savings, even against a backdrop of falling interest rates.
Start by looking at money you may need to get at quickly, such as cash held for emergencies or for your short-term goals. A suitable option might be an easy access account where you can withdraw funds without paying a penalty. We also always recommend you have six months’ worth of expenses in an easy access account to cover for any unexpected emergencies.
Next, it’s worth thinking about whether you have room to save money that you don’t need immediate access to. For example, a fixed rate bond account could be a great way of locking in a guaranteed interest rate for a set period, protecting your savings from future rate cuts until the fixed term comes to an end.
It’s worth me mentioning that you won’t benefit from rate increases during the fixed term and you usually can’t make withdrawals from these types of accounts until the fixed term is over.
We offer a wide range of savings accounts to suit your plans, whether you’re looking for flexibility, a fixed rate or the benefits that come with tax-free saving. And with rates on the way down, acting sooner rather than later could make all the difference to the interest rate you receive.
2. Act before rates drop further
Timing could make all the difference when interest rates are falling. Right now, some accounts still offer rates above current levels of inflation.
So the questions is, do savers try to lock into what’s still available in case rates fall any further?
You may even find rates on some easy access accounts are higher than fixed rate accounts right now. Yet it’s important to think ahead. If rates do continue to drop, variable rates will no doubt follow – meaning in a few months’ time they might not be as good as what fixed rate products are offering now.
If you’re keen to use a fixed rate account for parts of your savings, it might be worth exploring your options sooner rather than later. Securing a fixed rate by opening a new fixed rate ISA or bond account could make a difference to how much your savings grow over time. Plus, you have the added bonus of reassurance that the rate you choose will stay the same until your term ends.
3. Think about whether investing could be right for you
If you’ve got longer-term goals – like saving towards retirement – investing could be a smart move. This is because investing could help you to achieve higher returns than what a savings account could offer over the long-term, providing you’re happy to take some risk with your money.
Research from Barclays suggests 13 million UK adults are sitting on £430 billion in excess cash savings – potentially missing out on higher returns from investing. So for those who won’t need this money for at least the next five years, you could be earning more in the long-term by investing in the stock market – and this could make a difference to your financial future and personal goals.
For these reasons, a conversation with one of our expert financial advisers could help you to better understand your options. And the great thing about speaking to us about your long-term goals is that it costs nothing upfront to find out if we could help you or to hear our personalised recommendations. You’ll only be charged if you go ahead and act on our advice.
Our financial advice service could be right for you if you have at least a lump sum of £20,000 or you can invest £500 each month.
Our recommendations are likely to include stock market-based investments. These aren't like building society savings accounts. The value of your investments and any income can go down or up and you may get back less than you invested
4. Empower yourself – and your savings – with a conversation worth having
Still unsure what to do with your savings? A chat about your money will help you to find out more about your options. And we can help you with this through a free My Money Review.
This is a relaxed conversation with one of our savings specialists to talk about your short, medium and long-term goals for your money. The chat takes around an hour and is very much led by you – at the end of it, we’ll provide you with a report with our recommendations on what we feel is right for you.
After the chat there’s no pressure for you to do anything and we’ll take everything at your pace. We could also arrange a further appointment for you to speak to one of our financial advisers to discuss things like investing or saving into a pension.
Don’t just take our word for it
David, from Selby, told us about his My Money Review:
“I had such a great experience with Shelley at the Selby branch. We had an hour-long chat about my finances which helped me to see problems and opportunities. Shelley gave me great advice."
(April 2024)
After the chat there’s no pressure for you to do anything and we’ll take everything at your pace. We could also arrange for you to speak to one of our financial advisers to discuss things like investing and saving into a pension.
The opinions and information provided in this article are not advice. If you are looking for advice, you should speak to a financial adviser.
The opinions and information provided in this article are not advice. If you are looking for advice, you should speak to a financial adviser.
