Savers must prepare to see rates drop further, warns Personal Finance Analyst

However, there’s still plenty of reason to shop around for a savings account.

Consumers looking to lock away their cash in 2026 should brace themselves for lower returns, with data from Moneyfactscompare.co.uk revealing average fixed rates have already fallen across the board since December.

In particular, the typical rate paid by a one-year fixed bond dropped to 3.85% at the start of this month (down from 3.92% in December) - its lowest in almost three years.

To make matters worse, the best fixed returns on offer have also been on a steady decline. “Two years ago, the market-leading rates paid well over 5% and savers could now be enjoying over £1,100 in interest,” said Caitlyn Eastell, Personal Finance Analyst at Moneyfactscompare.co.uk. “In comparison, re-investing £10,000 for the same term now will leave them approximately £240 worse off by the time it matures in 2028,” she explained.

But, with rates expected to come down even further this year, it might be that savers can’t afford to dwell on past returns for too long.

Swap rates – often used by banks and building societies as a benchmark for their pricing – have lingered at their 30-day lows since the Bank of England cut the base rate in December. If these levels are sustained or fall further, “savers should be prepared to see savings rates slashed over the next few weeks,” warned Eastell.

Is there still an incentive to save?

Even though it’s likely that rates will continue to fall, there’s still plenty of reason to open a savings account.

For instance, over 40% of adults are at risk of having their savings eroded by storing their money in a current account, a recent survey conducted on behalf of Moneyfacts found. “Most current accounts will not pay any interest on balances, and with inflation remaining above its target, these savers will quickly see their hard-earned cash lose value in real terms,” Eastell cautioned.

Instead, those with a lump sum they won’t need to access in the immediate future might want to consider setting their money aside in a fixed bond for a guaranteed return that won’t be affected by rate cuts. The 1 Year Fixed Rate Saver from Marcus by Goldman Sachs® currently offers the best fixed savings rate at 4.55% AER (as of 14 January 2026), however, there are plenty of competitive accounts to choose from depending on a savers’ specific needs and circumstances.

However, Eastell recognised that a “fixed bond may not be for everyone” and reassured those who want to keep their money within close reach that many of the most competitive easy access accounts continue to pay in excess of 4.00% AER.