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Bank of England cuts base rate to 5%...
Check your savings rate NOW - millions can DITCH & SWITCH to earn 5.2% easy access or 5.15% fixed

After months of speculation, the Bank of England has finally cut interest rates for the first time in over four years, with the base rate falling last Thursday from 5.25% to 5%. 

It's accelerated the downward trend we've seen in savings rates over the last few months - hours after the Bank's announcement, our inboxes were flooded with notifications from banks about cuts to their savings products (yet sadly, and predictably, we've not seen the same pace of cuts for mortgage borrowers).

Some analysts are suggesting the base rate won't be cut again until December, yet this should serve as an urgent reminder to EVERYONE to check their current savings rate NOW. Millions are on naff rates and can ditch & switch to easy-access or fixed-rate savers or cash ISAs paying far more, or even lock in a rate to hedge against future cuts.

Easy-access savings are the simplest form of savings, where you can put money in and take it out when you want.

 - Pros: Flexibility. Access to your cash whenever it's needed, and you can ditch at speed if the rate's no longer competitive.

- Cons: They're all AER variable, which means rates can and do change, so you need to monitor them.

Remember, rates change rapidly, so do check the latest top easy-access savings and the latest top easy-access cash ISAs.

• Top easy-access savings – and it's a CASH ISA paying 5.2%. Unusually, the best savings rate at the moment comes from a top cash ISA (a savings account you can put up to £20,000 per tax year in and the interest's NEVER taxed). That's Trading 212's* 5.2% AER (min £1). The name might sound a bit odd, because it's a share-trading platform, but it should all work like normal, though you can read more about its complex structure. Next best ISA is app-only Plum, paying 5.17% AER (min £100), yet it's another that's a bit complicated.
  
  
• Top OPEN-TO-ALL easy access pays 5%. Technically the top normal easy-access account is NatWest Group's Ulster Bank at 5.2% AER, but that requires an Ulster current account and a hard credit check. Principality's 5% AER (min £1) is next best, but only allows 3 withdrawals a year. Or Close Brothers pays 4.9% AER but has a high £10,000 min deposit.
  
  
• Top BIG NAME online easy access pays 4.85%. You often tell us you want a name you know. Top is Santander-owned Cahoot at 4.85% AER (min £1), followed by Virgin Money's 4.76% AER (min £1), though it only allows 3 withdrawals a year. Tesco Bank's* 4.66% AER (min £1, lasts 1yr) allows unlimited withdrawals and has the same low £1 min deposit.
  
  
• Top 'IF YOU BANK WITH US' accounts pay 6%. For these easy-access accounts, you need to have a current account with the bank to open them. The rates are higher, but the amounts limited. The standout is Santander's Edge Saver*, which pays 6% on up to £4,000, though the current account has a £3/mth fee.

How savings tax works... If you've savings that aren't in an ISA, then interest is paid to you tax-free, but can be taxed as income. Yet each year you get a personal savings allowance, which means:

- Basic 20% rate taxpayers don't pay tax on the first £1,000/yr of interest.
- Higher 40% rate taxpayers don't pay tax on the first £500/yr of interest.
- Top 45% rate taxpayers pay tax on all interest (outside an ISA).

As interest rates have risen, you need far less saved to bust the limit. At 5% interest, a 20% rate taxpayer would earn enough to pay tax with £20,000 saved, a 40% rate taxpayer earns enough to pay tax with £10,000 saved.

Already have cash ISAs? Transfer to a top payer. If your existing cash ISA pays less, most of the top payers allow you to transfer into them. To do this, just apply for a new cash ISA, and as part of the application you'll be asked if you want to transfer your existing cash ISA over (don't just withdraw cash to move it, then it loses its 'cash ISA' status).

With fixed-rate savings and fixed-rate cash ISAs, the interest rate is guaranteed till maturity - it can't change during the term. But your money's LOCKED AWAY, which also means that if in a few months the accounts no longer look competitive, you're usually stuck with 'em.

This doesn't apply, however, to fixed cash ISAs, where you can access your money (for a penalty) - so while normal fixed savings rates are higher than fixed ISAs, the latter can be useful if there's a chance you'll need to access the money during the term.

One-year fixes currently out-pay all longer fixes, though you may want to lock in for longer if you want certainty of returns for the future, especially if you think rates will drop further.

Again, rates change rapidly, so do check the latest top fixed savings and the latest top fixed cash ISAs.

Is it worth fixing now? Fixed rates are based on the market's view of future rates. Following last Thursday's base rate cut (which was expected and already priced in), markets are pricing in one further cut before the end of 2024, likely towards the end of the year, with further cuts then expected to follow in 2025.

But predictions can and do change, so there's a balance between crossing your fingers and leaving your cash accessible and earning (slightly) more in an easy-access account, in the hope the base rate will stay stable over the next few months, versus locking in a lower-paying fixed rate on the basis that rates are firmly on their way down.

A taxing question for fixed rates. The interest on fixes crystallises for tax when you can access it, so some may want it paid monthly so they can spread out the interest over years, rather than get it in one lump which may push them up a tax bracket. Others may want it all paid at the end as, for example, they're retiring and may be a lower taxpayer then. For more, see our fixing: a taxing question help.

Note that if you've a fixed cash ISA, none of the interest will be taxed provided it remains within the ISA wrapper.

Locked in to a poorly paying fixed cash ISA? Cash ISAs, even fixes, can't lock you in - they must allow you to withdraw money, though can charge an interest penalty for doing so. Many who locked in 2+ years ago are on terrible rates and should pay the penalty to move. Our Should I ditch my fixed ISA? calc checks the maths works for you.

Warren did, and emailed: "Took Martin's advice and switched two low-paying fixed ISAs into a one-year fixed ISA paying 5.36% - it cost me £118 in penalty charges but they will generate £880 in the new ISA."

There are a few specialist savings options some can take which pay more. So here's our checklist of other things to look at...

1. Are you on UNIVERSAL CREDIT or Tax Credits? You may qualify for an unbeatable 50% Help to Save bonus.

2. Do you have existing expensive DEBT? Paying off debt is usually more lucrative than saving. See our Should I pay off my debt? guide, the Should I overpay my mortgage? guide, and use our Mortgage Overpayment Calculator.

3. Are you a wannabe FIRST-TIME BUYER aged 18 to 39? There's a whopping 25% bonus possible via top Lifetime ISAs.

4. Save regularly each month? Earn over 10% in top regular savings.

5. There's nowt wrong with investing either. With investing, you aim for higher returns, but accept the risk you could lose some or all of your initial investment. We don't talk much about it, not because we're against it, just because it's not our area of expertise.

For many, over the longer run, investing is the right call. For an introduction, see Stocks & shares ISAs, but you'll need more specialised websites for help on what to invest in.