Copy article

Moneyfacts: savings rates to fade in 2026

ended 19. January 2026

In its latest savings analysis, the Moneyfacts Average Savings Rate has fallen from 3.40% to 3.35% for January, the lowest figure since May 2023 (3.20%). Over the past year the rate has fallen from 3.64% to 3.35%. The average one-year fixed rate fell to 3.85%, its biggest fall since June and its lowest since April 2023 (3.81%). The longer-term average fixed rate fell for a second month running to 3.80%, its lowest since November 2022 (3.77%). Views from Moneyfacts below. Any thoughts, specifically on whether there are any positives to this as more people might move into investments or other investments, send them across ASAP as this story is breaking.

 Caitlyn Eastell, Personal Finance Analyst at Moneyfacts, said:

 “A new era in the savings market may be taking shape this year, as savings rates are anticipated to fade from the peaks caused by the market volatility seen over the past three years. The impact of December’s base rate reduction is already making itself known, as all average rates have fallen for the first time in over six months and the number of accounts paying above base rate saw its biggest rise on record to 877, accounting for just under 40% of the market. However, this means that over 60% still don’t match base rate, leaving savers’ cash languishing and making it harder to build financial security.

“Interest rates are expected to settle around 3.25%-3.50%, the last time they were around this level was December 2022. During this time, the Moneyfacts Average Savings Rate was around 2.80%, whereas at the start of this year it was 3.35%. Similarly, the margin between savings and borrowing is around 0.24% lower than this time last year. Together, this signals that current savings rates may not last and there’s still plenty of headroom for rates to fall. Any fluctuations against the trend are likely to be providers reacting to individual targets.

“The upcoming new tax-year marks the final period for savers under 65 to maximise their £20,000 cash ISA allowance. This may encourage more optimistic savers to wait until ISA season, when competition might typically ramp up. However, the ‘wait-and-see’ approach could come at a big cost. Across the big banks, they offer just 1.53% on their easy access cash ISAs**, which could leave savers around £450 worse off compared to if they stashed their full allowance into an average one-year fixed cash ISA. The difference becomes more dramatic if they were to switch to the current highest paying accounts. In any case it is crucial that savers review their rates over the coming months to ensure their tax-free allowances are fully utilised.”

5 responses from the Newspage community

Copy all

Copy

Editor
Philly Ponniah
Chartered Wealth Manager and Financial Coach at Philly Financial
I’d frame it as a potential positive rather than a guaranteed shift. For most people, lower savings rates won’t suddenly push them into investing. The UK is still very cash-heavy and a lot of savers value certainty over growth, even when returns are poor. What it does do is create a moment of friction. When rates fall, people notice their money isn’t moving and that’s often the first step towards questioning whether cash alone is enough. The real positive is awareness, not behaviour change overnight. Falling rates make the trade-off clearer: safety versus growth. A small group will act by drip-feeding into investments or using stocks and shares ISAs, but many will simply shop around for better cash deals. So it’s a positive in terms of nudging the conversation forward, not because millions will suddenly invest, but because it slowly chips away at the idea that cash is a long-term solution.
Copy

Editor
Anita Wright
Chartered Financial Planner at Ribble Wealth Management
Falling savings rates should not be the trigger for people to start treating cash as a long-term wealth strategy. Cash should primarily be held to meet short-term financial needs and provide stability, not to deliver long-term growth. While fixed-rate ISAs can look attractive on headline rates, savers must be very clear that early access usually comes with interest penalties, so this is not suitable money if there is any chance it will be needed. It is also no surprise that saving ratios are under pressure when the pound has been steadily losing purchasing power and everyday living costs remain high. For many households, using the full ISA allowance is simply not realistic, so the supposed advantage between fixed and variable rates becomes largely negligible in practical terms. The bigger risk is not missing out on a few tenths of a per cent in interest, but relying on cash for too long and watching inflation quietly erode spending power. Cash has a role, but it should be doing a job,
Copy

Editor
Scott Gallacher
Director at Rowley Turton
As savings rates continue to fall, savers will question whether it makes sense to accept negative real returns in cash. For money not needed in the short term, this could prompt many to invest, where returns have historically outpaced cash over the long run. While cash remains essential for rainy days and peace of mind, falling rates push people to think about how much they really need sitting on deposit.
Copy

Editor
Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
Over the longer term, cash savings are unlikely to outpace the gradual rising costs of goods and services.

To have a fighting chance of keeping your buying power, investing is sensible. However, this should be done within the context of a proper financial plan that factors in when you'll need the money and how you'll deal with the inevitable periods of stock markets dipping.

There will always be periods where the interest on cash savings is higher than what investments have returned, but this is an anomaly rather than a longer term trend.
Copy

Colin Low
Managing Director at Kingsfleet
The current direction of travel for interest rates is definitely down due to the reduction in inflationary pressures. However, there are multiple issues building which could well cause inflation’s ugly head to rise again. Ranging from more tariffs to oil prices, and from supply logistics to wage costs, all of these are building to increase inflation once again.

If that is to happen, rates may not reduce as rapidly as the market is thinking and, potentially could even be reversed.

From an investment perspective, investing is for the long term and savings should be for covering emergencies or for expenses in the next 3-5 years.