Martin Lewis has revealed that now is the time to act if you want to boost your savings.
The British money saving expert, 52, discussed his top tip for saving more money during Tuesday’s episode of The Martin Lewis Money Show Live on ITV.
As the UK base rate is expected to drop this Thursday, Martin urged Brits to check what interest they are currently earning on their saving accounts.
He told the live audience: ‘Interest available to savers will continue to decrease, so savers this is a crucial moment to act.
‘Check now what rate you’re earning. If it is less than five per cent – we need to sort it.’
As the UK base rate is expected to drop this Thursday, Martin urged Brits to check what interest they are earning on their saving accounts
Going into more detail, Martin said: ‘The UK base rate, this is the Bank of England set rate, obviously was very low and then it’s risen recently and peaked at 5.25 per cent.
‘It’s dropped to five per cent now and we are expecting on Thursday that interest rate to drop by about a quarter of a per cent.’
Although Martin warns that this drop is not guaranteed, he said there is an 80 per cent likelihood of the base rate dropping to 4.75 per cent later this week.
He continued: ‘Over the next year, we would expect the Bank of England base rate to drop by another one percentage point.
‘If we look at easy access savings – those are the ones you can put money in and take it out whenever you like – you’ll see they follow the base rate pretty closely so we’d expect that to drop as well next week.
‘If we look at fixed rate savings where you are locking your money away, they tend to be set based upon the market’s long-term prediction of future interest rates so they rise ahead of the rise generally and they start to fall ahead of the fall because they are looking at what is likely to happen.
‘They have already started to come down.’
‘When inflation was very substantially higher than you were earning in savings, in reality, putting money in the bank meant that you were decreasing its purchasing power because it was not growing as quickly as prices were so when you took it out you could buy less than you could have done when you put it in.
‘At that point, savings weren’t savings, they were losings.
‘Now though we are in the position where inflation is substantially lower than we have on interest rates so your money is growing in real terms.
‘If you put money away in savings and in a couple of years, you will be able to buy more with it than you could at the point you put it in.
‘Saving is finally, at last, paying.’
Martin Lewis predicted that the UK base rate will fall to 4.75 per cent this Thursday
An audience member called Ivan told Martin that he has £10,000 in his HSBC current account – which pays no interest.
He asked the money saving expert for practical advice for putting it in savings.
‘What should I do and where should I start?’ he asked.
Martin told Ivan by keeping this money in a current account, he is losing out on £500 per year.
He advised Ivan to take the ‘really easy bog-standard’ first step by placing the £10,000 in an Easy Access Savings account.
‘This is where you can put money in when you like and you can take money out when you like.
‘Very simple. The big risk? It’s variable so these rates can change both with the Bank of England but also if providers decide to drop the rate so you have to monitor your Easy Access Savings rates.’
Martin goes onto explain that the current ‘top payer’ is for those who have a Santander Edge bank account where you can get six per cent but only up to £4,000.
‘That is not a big amount in savings accounts in terms of what the maximum limits are,’ Martin said.
‘Surprisingly at the moment, Cash ISAs – which are a type of savings account you don’t pay tax on – normally they are lower than normal savings but at the moment the top two payers are the highest you can get on Easy Access.’
Martin added: ‘They both went up again today, probably because we’re doing this show and they like to compete against each other.’
Moneybox and Trading 212 are offering 5.15 per cent interest.
Martin Lewis went through East Access accounts to open on his ITV show on Tuesday night
Turning to Ivan, Martin said: ‘That is the most you’re going to earn Easy Access. You can put up to £20,000 in a Cash ISA each year so as long as you haven’t filled this year’s ISA allowance, that would be your start point.
‘Let’s do some maths: 5.15 per cent of £10,000 – I can do that easily – that’s £517 a year and that’s how much better off you would be if you just plonk it in there.’
If you have filled your ISA allowance for this year or have more money to put into savings, Martin has some recommendations for Easy Access accounts.
He said: ‘You will need to look at the top normal savings account which is with Chip at five per cent.’
Martin goes onto suggest Coventry Building Society with a 4.83 per cent interest rate and for those who don’t want to bank online, the best branch options are Co-op Bank at 4.59 per cent and Halifax at 3.9 per cent.