When will interest rates rise for savers?

Interest rates on UK savings accounts saw a rapid rise in 2023, after the base rate peaked at its highest level since 2008, and it was a similar story in mainland Europe, with savings rates gradually increasing in 2023 following eight long years of ECB-set negative interest rates. 

Since then, we’ve seen savings rates in the UK slowly level off again, and the base rate was held at 4.75% in December 2024. So, what’s next for the UK? We look at the savings rate forecast for 2025 and beyond.

Interest rates have been held at 4.75%, and the high interest rates we've seen in recent years are unlikely to be around for much longer. It could be worth considering locking your money in now.

While inflation is expected to climb in early 2025, some economists are still predicting that the Bank of England will cut rates. Paul Dales, chief UK economist at Capital Economics, said he expected four rate cuts next year.

The next interest rate decision is on 6 February 2025.

The MPC reviews and announces the base rate eight times a year (approximately every six weeks). You can view the upcoming dates for 2025 on the BoE website.

The best savings account for you will depend on your personal circumstances and how much flexibility you will require. However, some of the highest interest rates can be found on fixed rate bonds. Regular savings accounts often also offer high interest rates, but these come with restrictions, like the amount of money you can deposit per month.

The direction of UK savings interest rates in 2025 will depend on a number of factors, including inflation, interest rates, and economic growth.

Before the Budget announcement on 30 October, economists at Goldman Sachs were predicting that interest rates would fall to 2.75% by next autumn. However, after Chancellor Rachel Reeves announced a £70bn increase in spending on services and infrastructure, financial markets are now predicting that it will reach around 4% by the end of next year.

Economic growth is another important factor that will affect savings interest rates. If the UK economy experiences a recession, banks may be less likely to offer high interest rates on savings accounts, as they will be more focused on lending money to businesses and consumers rather than attracting deposits.

Whether or not you should fix your savings now or wait depends on your individual circumstances and financial goals, but with interest rates already falling, now could be the ideal time to lock your money in. Longer-term savings accounts, for example 2 or 3 year fixed rate bonds, are an attractive option for savers as they often guarantee good returns.

Another thing to consider is how long you plan to keep your savings fixed. If you know you’ll need access to your money in the short term, then fixing your savings for less than a year may be a good option for you. However, if you are saving for a long-term goal, such as retirement, then you may want to consider fixing your savings for a longer period of time. This will give you more certainty over how much interest you will earn over the long term.

Ultimately, the decision is a personal one. There is no right or wrong answer, and the best decision for you will depend on your individual circumstances and financial goals.

Regardless of what happens to the savings interest rate, there’s never a bad time to save. To find the best savings account for you and compare interest rates on savings accounts, register for a Raisin UK Account and log in to apply.