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Next week, the Bank of England’s monetary policy committee will meet again to discuss the base rate and it could directly impact saving accounts. 

The base rate currently stands at 5.25% and it has remained at this level since August 2023. This means the monetary committee has not changed the base rate for the past six meetings - will it be lucky number seven? 

It does feel like the committee is inching closer to a decision to drop the rates. Inflation has slowed to 2.30%, which is tantalising close to the Bank of England’s target of 2.00%. Thankfully, the peak of 11.10% in October 2022 seems like a distant memory. 

And now we are seeing global markets dropping their rates. For example, The European Central Bank reduced interest rates last week - for the first time in five years. 

This is positive progress, but there are still some areas of concern for the Bank of England. 

Wage and services inflation still remains high as it only slowed slightly to 5.90% in April and unemployment in the UK is at the highest rate since September 2021. It’s been widely documented the committee will only drop rates when they are confident inflation is staying low. 

However, more data is being released next week, and if it contains positive inflation news could this be enough to sway votes? 

There is also the matter of a general election next month, so will the Bank of England opt for a drop now or rather wait until the political landscape has been decided? 

The predictions for this decision seem to change every day, so it is understandably a confusing time for savers. 

But there is one thing we do know - it’s highly unlikely the Bank of England will raise interest rates, so it’ll either remain at 5.25% or it could drop to 5.00%. 

This is what savers should focus on. If the base rate sticks at 5.25%, interest rates on savings accounts could look familiar, with another month of top rates at around 5%. 

If the vote swings the other way, then the base rate could drop to 5.00%. This is the risk for savers as the current rates could then drop below 5.00%, as providers are keeping a close eye on the base rate. 

This is why it’s important to act now if your money is sitting in a savings account with low interest. If savers wait to see what transpires at the next Bank of England meeting, then it could be too late to take advantage of these high rates. 

To guarantee the interest rate, savers could consider opening a fixed-rate savings account. 

This type of account varies from one year to five years, depending on how long the saver is comfortable locking away their money. 

Currently, one of the top interest rates for a one-year fixed-rate account is 5.20% from The Access Bank UK. This can be opened with a minimum deposit of £5,000 and the interest is paid when the term ends next year. 

If a saver opened this account and deposited the minimum amount then they would earn £260 (before tax) in interest. However, if a saver waited for the Bank of England announcement and the base rate was reduced, then the interest rate could drop below 5.00%. 

For example, if the same account dropped to 4.50%, then the annual earnings would only be £225, which is £35 less. This is only the beginning, as the loss is greater the more money that is deposited. 

If someone deposited £20,000 today at 5.20% they would earn £1,040 after one year (before tax). But if the interest rate dropped to 4.50%, they would only earn £900 - a loss of £140. 

So, it could really cost savers if they wait to move their money.