Best savings accounts with above-inflation rates

With the cost of living crisis, British households are looking for any way to stretch their pennies a little, and savings accounts could help.

After years of low interest rates, high-yield savings accounts are enjoying a new lease of life as the Bank of England has kept rates at a 16-year high of 5.25%. While homeowners face higher mortgages, there is also a silver lining to the higher cost of borrowing as consumers can now find UK savings accounts that offer more than inflation.

Inflation in the UK remained unexpectedly unchanged at 4% in January.

Savers should definitely shop around to find the best deals and check what interest rate applies – as they could still be stuck with a product that is not keeping inflation under control.

The most important factor to consider when choosing a savings account is the difference between an always-available savings account and a fixed-term savings account.

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In short, easy-to-access accounts give you access to your money when you need it. Fixed deposits, as the name suggests, are accounts where you cannot access your money during the term of the contract. They usually offer better interest rates, but you have to cope with the idea of ​​not touching your savings for a long period of time, usually between one and five years.

What are the best high interest fixed rate accounts?

The best fixed rate account currently offers 5.28% and is available from SmartSave. The one-year fixed rate offer requires a minimum of £10,000, but you can invest up to £85,000. Withdrawals are not permitted during the term of the offer.

At maturity, at the end of the fixed interest period, customers receive 5.28% on balances. For example, if you invest £10,000 with them today, you will get your money back plus £528 in interest in 12 months.

The second best fixed rate account offers 5.27% and has lower requirements. The MBNA Fixed Saver One-Year account requires a minimum of £1,000 locked for 12 months.

HTB offers a shorter six-month deal that pays 5.18%. The minimum deposit is £1, but you can deposit up to £250,000. Again, no withdrawals are allowed during those six months.

Online banks typically offer much higher interest rates than traditional branches. This results in better returns and provides you with a more efficient way to save and reach your financial goals.

However, if you prefer a well-known name, the major lenders will offer you slightly lower deals, but still above the rate of inflation.

Barclays (BARC.L) offers the highest interest rate among branch banks. Its one-year fixed-rate savings account pays 4.65%. The requirements are also affordable, with a minimum of £500.

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Metro Bank is not far behind with an interest rate of 4.61% and similar terms. One year fixed term and a minimum of £500.

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Lloyds (LLOY.L) offers a fixed rate savings product at 4.35% for one year, but the minimum deposit is £3,000 and you must have or open a current account with Lloyds or another savings account to be eligible.

How does a fixed-interest savings account work?

Unlike free-standing savings accounts, whose interest rates can vary, fixed-rate accounts do what their name suggests. You get a fixed interest rate for the period you choose, whether it's six months or one, two, three or even five years. These are the most common offers, but some run for up to 10 years or more.

However, your original deposit must be available for a set period of time and cannot be withdrawn. If you touch your money, you will lose all interest.

What are the best easily accessible savings accounts?

Easy access savings accounts are simple types of savings accounts that allow you to withdraw your money without notice.

However, with this easy access comes lower interest rates compared to fixed rate accounts. They are a good option for those who think they may need their money quickly.

Note that the interest rates on these accounts are variable, meaning they can rise or fall. You will be notified in advance of any change.

Paragon Bank currently offers the highest interest, easy-access savings account on the market, offering 5.16% that can be paid out annually or monthly.

This account can be opened with £1,000 but you can top up to £500,000. However, you can only make two fee-free withdrawals per year and if you go over this amount, your interest rate drops to 1.5%.

Close Brothers is close behind, with an easy-to-access account that returns 5.12% annually. You can open it online with just £10,000.

Virgin Money's offering is similar, paying 5.11% at maturity but requiring slightly less money. A minimum deposit of just £1 is required to open the account, which you can do online or via mobile banking.

There are even higher-interest, easy-to-access accounts, but they are not for new customers. For example, Santander's (BNC.L) Edge Saver offers 7%, but is only for current account holders.

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Skipton Building Society is paying 5.5%, but the offer is only available to mortgage holders or people who had a savings account with the lender before January.

What are the best termination savings accounts?

If you can't decide whether you would rather put your money aside and not touch it for a long time or access it at any time, then you might want to consider a termination savings account.

With cancellation savings accounts, you must cancel your account with your savings provider before you can withdraw your money.

It is ideal for those who know when they might need their cash, but you don't want to be tempted to access it beforehand

You must give the bank or building society a certain amount of time before you can withdraw your money – usually between 30 and 120 days.

The Bank of London and the Middle East (BLME) is offering a deal with 5.35% with 90 days notice. The deal can only be opened online and you need a minimum of £10,000. Interest is paid quarterly.

Read more: Inflation: What is it and what does it mean for you?

StreamBank offers a 90-day notice account that pays 5.3% after the three months. You need between £1,000 and £100,000 to apply.

The interest rate on termination accounts is variable, which means it can rise or fall over time.

What are the best savings accounts?

Those who want to make the most of their cash savings can earn returns of up to 7% with traditional savings accounts.

Most traditional savings accounts require you to put money aside each month and earn interest annually.

For existing customers, First Direct offers 7% for a year but allows a maximum monthly deposit of £300. You cannot miss any months, and a minimum of £25 must be deposited into the account each month.

Withdrawals are not possible without penalty and if you close the account before the 12 months are up, the interest rate drops to 2%.

The Co-Op Bank is offering a 7% deal, but only for existing customers. With a one-year fixed rate, you can save up to £250 a month and skip months without penalty fees.

Nationwide used to have a market-leading offer of 8%, but this has now dropped to 6.5%. Nationwide's offer is a standard savings account, available exclusively to current account customers.

All trades mentioned here are covered by the Financial Services Compensation Scheme (FSCS), so you are protected up to £85,000.

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