Going, going…. not quite gone. Why you need to act now to fix your cash savings

The Bank of England made its first cut to interest rates this week, dropping 0.25 percentage points and taking the base rate from 5.25% to 5%.

The August interest rate cut will ease the pressure on some households by reducing borrowing costs , but for savers, this is a wake-up call to act now on cash.

We have had a nice run of inflation -busting interest rates , and anyone holding cash for short-term savings goals should be enjoying decent cash returns. In May, there were over 1,500 inflation-busting savings accounts on the market.

Despite this, research shows a large proportion of cash savers are still sitting on low rates , especially those who leave large amounts in current accounts which pay little or no interest.

Now more than ever, as interest rates fall, it is time to act as savings inertia will cost you real returns.

Are banks dropping rates?

At MoneyWeek HQ, we monitor interest rates daily and it seems banks have wasted no time in dropping rates on cash savings.

We looked at rates soon after the Bank of England’s announcement on 1 August and found that several banks had dropped their rates. This is something they would have planned in advance given experts were widely expecting the MPC to start cutting the base rate at some point this year.

Some one-year fixed-rate accounts that dropped their rates include:

• My Community Bank 1 Year Fixed Saver - dropped from 5.26% to 4.8% AER
• Tandem Bank 1 Year Fixed Saver - from 5.12% to 5.01% AER
• Shawbrook Bank 1 Year Fixed Rate Bond - 5.1% to 5.01% AER

Cash ISA rates have also fallen with one provider, Beehive Money, pulling its 4.7% two-year fixed-rate cash ISA.

Banks are perhaps running out of generosity - after all, there was never much of it to start with. In fact, many banks also came under pressure to boost their rates following interest rate hikes between November 2021 and August 2023.

Can I still get good rates on cash savings?

The good news is that there are still some bank accounts offering good rates. These are worth a look if you have cash to save. The top rates might not hang around, though. If the Bank cuts rates again, you may well miss the savings boat.

Of course, the only way to ‘guarantee’ you’ll earn a certain amount is to opt for a fixed savings account. We list the top deals on our fixed savings page - at the time of writing, the top deal is 5.15%.

If you think you may need access to your cash sooner, then an easy-access account can still earn you up to 5.2%, though rates may be variable.

Closed accounts

Another important thing you may want to check is the rate on closed or matured accounts . The average closed easy-access account rate has been lower than the live equivalent over the past two years, according to Moneyfacts .

If you have not reviewed your savings in the last two years or more, your bank may be short-changing you.

As of 31 July, closed accounts must comply with new Consumer Duty rules and banks must consider if they offer fair value. But, if you think you are being short-changed, move your money before it is too late as you could be better off by thousands.

The next Bank of England MPC meeting is on 19 September and we may see further rate cuts . Could it be time to lock in those yields now?