Savings round-up. Rates fade rather than fall in 2025

Although it’s unusual to see a base rate cut in December, (in the last 50 years, it’s been cut in December just 12 times) I’m afraid on this occasion it was inevitable, especially when the latest inflation information was announced. Lower than expected inflation gave the Bank of England the ability to cut the base rate by 0.25%, although once again it was a close thing as the vote was 5-4 in favour with the Governor, Andrew Bailey, casting the deciding vote. Good news for borrowers, but not such great Christmas cheer for savers.

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The savings markets in 2025 have been shaped by shifting expectations for interest rates but with the base rate beginning the year at 4.75% and finishing 1% lower at 3.75%, the impact on savings rates has been clear to see. That said, sometimes fierce competition means that the falls have been more modest than they might have been.

As we approach the end of 2025, let’s take a look at how the key areas of the savings market have performed, and what’s still available for savers today.

Easy access savings

Bearing in mind the base rate had fallen to 4.75% by the beginning of 2025, from a high of 5.25%, the year began with easy access accounts still looking pretty respectable. Top payers in early January 2025 were paying as much as 4.85%, due to ongoing competition. And although the base rate was cut twice in the first half of the year, Chase Bank bucked the trend and introduced an easy access account paying 5% in June, putting a cat amongst the pigeons and keeping competition alive. But after another base rate cut in August, even Chase had to start reducing what it was offering. And as the year progressed and the market started pricing in lower base rate expectations, those headline easy-access rates have steadily softened. That said, at the time of writing, the very best easy access accounts are still paying up to 4.50% - still being driven by Chase!  

For savers who need and value immediate access, returns remain reasonable, although the very best deals are less generous than they were in January. For basic rate taxpayers, at the moment if you pay tax on the interest you earn, as long as you have your cash in an account paying 4% or more (before the deduction of tax) your interest will at least keep up with the rising cost of living.  

For higher and additional rate taxpayers it’s more of a challenge as you’d need to find an account paying 5.33% gross/AER and 5.81% gross/AER respectively.  

There are some providers that pay a little more, but for lower balances. Cahoot, for example is still paying 5% AER on its Sunny Day Saver, but only on balances of up to £3,000.  And Santander pays 6% AER on its Edge Saver Account on balances of up to £4,000, but you have to hold a Santander Edge Current Account, which comes with a monthly fee.

And of course, easy access accounts have variable rates, so can be cut at any time. The key here is to keep a close eye on what interest you are earning and switch if it becomes uncompetitive. That way you can mitigate at least some of the damaging effect of inflation.

Fixed-rate bonds

The top rates on fixed term bonds have also fallen by far less than the base rate over the last year, which indicates that there are still some good options to be considered before rates fall further.

What continues to be a trend is that the top long-term rates are lower than the top short-term rates, but the gap has narrowed: The drop in the top 5-year rate has been less than  0.20% over the year, from 4.50% to 4.31%, whilst the top 1-year rate has fallen from 4.79% to 4.46%.

This relative resilience makes sense when you think about how fixed products are priced: lenders hedge their duration and funding costs over the term of the product, so short-term shifts in base rate expectations don’t always translate into immediate dramatic rate cuts. But what it does indicate is that the base rate is likely to fall further in 2026 and possibly beyond.  

Whilst the top rates are lower than they have been in the recent past, the cuts have been considerably less than the base rate cut of 1% - so with more rate reductions expected, now could be a good time to lock up some of your cash – even for the longer term if you won’t need access to your money.

Check out our Best Buy tables for the latest rates

Easy access ISAs

Tax-free easy access ISAs began 2025 on a competitive note, with the top deals paying up to 5%. But the very best rates, both then and now were being offered by the ever more prolific digital money app providers, such as Moneybox, Plum and Trading 212.  

Although these providers have been around for a few years now, they had become a more prolific and dominant force in the market, which has been great news for those prepared to open and manage their ISAs via an app – and for keeping the competition alive.  

What is important to realise though is that these companies aren’t banks themselves, but they hold your cash with fully regulated UK banks, so your cash is protected by the Financial Services Compensation Scheme (FSCS), but it’s important to understand how that protection works. It’s the underlying bank’s licence that determines your protection, not the app you use. The FSCS protects up to £120,000 per person per bank licence, and this limit applies to all the cash you hold with that bank in total. That means you must add together any money you hold directly with the bank and any money you hold with it through different apps. Using multiple apps does not give you multiple £120,000 protections if they rely on the same underlying bank. Savers need to be aware of where their cash is actually held so they do not accidentally go over the FSCS limit with one bank.

Today, however, they are notably missing from the top five, taking a back seat for now, allowing other banks and more traditional building societies to appear. App only bank Atom is now in the top spot paying 4.25%, with the Principality Building Society in 2nd place with it’s Online Bonus 5 Access Cash ISA Issue 5 paying 4.20%. For those who would prefer a more traditional account without restricted access, Kent Reliance has an Easy access cash ISA – Issue 69, which is paying 4.16%. You can make as many withdrawals as you like and the account can be opened online or in branch if there’s one near you!

So, there’s plenty to choose from, and as the returns are tax free, at these levels the interest is paying more than inflation, so is keeping up with the cost of living.

Fixed-rate ISAs

With the recent Budget announcements that the annual cash ISA allowance will be cut to £12,000 for those under 65, and that the tax rate on savings interest will increase by 2% from April 2027, the value of a cash ISA is even clearer. Even with the lower allowance, using a cash ISA remains an effective way to protect your savings from tax.

So it’s great to see that the top ISA rates have remained pretty resilient throughout 2025, although inevitably have fallen a bit.

Once again, as with the fixed rate bonds, the fall in the top rates available are far less than base rate – but they may of course fall further following the latest news from the Bank of England.

And once again, the 5-year term rate has fallen by far less than the shorter-term rates – the top 5-year cash ISA available is now paying 4.14%, down from 4.18% at the beginning of 2025. Compare this to the fall of the top 1-year ISA rate from 4.53% in January, to the current level of 4.30%.

More importantly, the top fixed term ISA rates have fallen less than the equivalent fixed term bonds, so there has been a narrowing of the spread between fixed-rate ISAs and bonds, which suggests providers have been keen to keep those ISA wrappers competitive, even as base rate pressure mounted through the year.

Some people may think that cash ISAs do not offer the best value, as at first glance it looks like they pay a lower interest rate than the equivalent fixed rate bonds. But once you strip tax from the advertised rate, cash ISAs are offering far better value to those who pay income tax on their normal savings.  

For example, at the time of writing, the top 1-year fixed rate bond is paying 4.46% AER, whilst the top 1-year fixed rate cash ISA is paying 4.30% tax-free/AER. For those who don’t pay tax on their savings, the bond is clearly the winner as it would provide an extra £16 of gross interest for each £10,000 deposited.  

But if you are a taxpayer, you could earn more in the ISA. The rate on the bond would fall to 3.57% after basic rate tax has been deducted, so a basic rate taxpayer with a deposit of £20,000 would earn £860 in the cash ISA, but just £714 from the bond, if they have already used their Personal Savings Allowance. 

For savers who prioritise certainty and tax efficiency, the relative resilience of fixed rate ISAs has been one of the bright spots of 2025.

What’s next?

The lesson of 2025 is that savers who monitor the market closely and move quickly when attractive deals arise are likely to be the ones who benefit most.  

In their latest report the Bank of England stated, “We think that Bank Rate is likely to fall gradually further in future, but that will depend on whether variables like pay growth and services inflation continue to ease.”

So, we are likely to see more rate cuts, although hopefully not too many in 2026. This means that you should review your savings as soon as possible, and if you don’t need access to all your cash, perhaps it would make sense to lock into some of the rates that are currently available, to hedge against these future expected rate reductions. Rates may be drifting lower, but they haven’t disappeared - and there are still solid opportunities for those willing to look.

A platform such as Savers Hub, powered by Insignis, allows you to open, manage, and switch between a range of high-interest savings accounts through a single, secure log-in. This approach not only offers flexibility and control but also ensures that your cash remains easily accessible while working effectively for you.

Why not see how much you could be earning by requesting a free no obligation illustration today.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The opinions shared in this article are solely those of the individual and they do not necessarily reflect those of The Private Office.  

Accounts correct at 19/12/2025.

The Financial Conduct Authority (FCA) does not regulate cash flow planning,