Three in four UK savings accounts pay below Bank of England base rate as average returns fall

Three in four savings deals in the UK now return less than the Bank of England's 4% base rate, according to data from rates scrutineer Moneyfacts Compare, highlighting a squeeze on real returns for depositors as inflation remains elevated.

Moneyfacts said the average savings rate fell to 3.46% in its most recent monthly reading, down from 3.5% the previous month, and last exceeded 4% in January 2024. The average easy-access rate declined to 2.59%, the lowest level since July 2023. Moneyfacts estimated that only one in four available savings deals pays above the current Bank of England base rate of 4%.

The divergence between headline base rate and the majority of retail savings rates comes as consumer price inflation climbed to 3.8% in the 12 months to August, nearly double the Bank of England's 2% target. The BoE said in August it expects CPI inflation to peak at about 4% in September.

"As inflation is expected to climb higher, this means the vast majority of savers will see their pots eroded in real terms," Rachel Springall, finance expert at Moneyfacts Compare, said. "This will be incredibly demoralising for savers who use their interest to supplement their income."

Moneyfacts' data show the top easy-access deal at the time of publication pays 4.3% (from Spring Savings). To illustrate the impact, a saver keeping £5,000 in an account paying the average easy-access rate of 2.59% would earn about £129.50 in interest over a year; that same sum in the top 4.3% easy-access deal would deliver about £215.

Providers continue to offer higher rates for customers willing to lock funds away. The best one-year fixed-rate bond noted by Moneyfacts paid 4.5% from Chetwood Bank, while the average one-year fixed-rate bond returned 3.96%, down from 4.43% a year earlier. Bank of England statistics show deposits into fixed-rate accounts rose sharply in July, increasing to £4.3 billion from £1.2 billion in June — the biggest monthly inflow into fixed-term products since January 2025, when £5.8 billion was deposited.

"Savers who want to secure a guaranteed return on their cash may be wise to lock into a fixed bond or cash ISA," Springall said, reflecting a common industry view that fixed-term products can offer better nominal returns when rates are volatile.

Analysts and consumer finance specialists stressed that headline base-rate movements do not automatically translate into uniform changes across retail savings products. Financial institutions set account rates based on their own funding needs, competition, and product strategy, which can lead to a lag or divergence from Bank of England policy rates.

For many households, however, the combination of lower average savings rates and inflation above the level of typical deposit returns means real (inflation-adjusted) returns on cash are negative for most easy-access and many fixed-term accounts. That reality has driven some savers to move money into longer-duration fixed-rate deals, as reflected in the Bank of England's deposit flow data for mid-2025.

The current market shows variation: while a minority of accounts still top the 4% base rate, the majority of standard savings products yield less, and headline averages have slipped in recent months. Consumers seeking to protect spending power are being advised to check rates across providers, consider fixed-term options where appropriate, and factor in access needs and tax wrappers such as ISAs when choosing where to hold cash.

Banks and building societies regularly change rates and promotional offers, and Moneyfacts' monthly tracking provides a snapshot of those movements. The descending average and the climb in fixed-term deposits underline how savers are adjusting strategies in response to a mix of monetary policy, inflation dynamics and product availability.