Savers will miss out on hundreds of pounds in interest if they lock into a fixed rate deal too soon, experts have warned, as the Bank of England expedites its plans to raise interest rates.
If an average saver waited five months before locking into a deal, they would earn £470 more in interest over two years, Telegraph Money analysis has shown. This has assumed a "best case scenario" of Bank Rate increases being passed onto savers.
The average account holder has £35,361 and the average two-year fixed savings deal currently pays 0.85pc, according to Raisin, the investment platform, and Moneyfacts, an analyst.
Savers would be paid £606 in interest over two years. However, if the Bank Rate was raised to 0.5pc in December, up from its record-low 0.1pc, and this fully passed through to savings deals, a two-year fix would then pay £895 in interest.
Rate setters have come under pressure to curb inflation, which hit 3pc last month, well above the Bank of England's 2pc target.
If the Bank Rate hit 0.75pc in March, as has been predicted by market forecasters, those opening a two-year fixed account would be paid £1,076 interest, £470 more than a deal opened this month.
Laura Suter of stock broker AJ Bell said: “Anyone considering putting their money into a fixed rate account now needs to think carefully about what they think rates will do in the near future.
"Any increase in the Bank Rate will translate into higher rates in the fixed-term accounts market, so those considering locking in a rate for three, five or 10 years need to think about how much extra they could earn if rates do rise."
Some banks offer shorter-term fixes, which may be more appealing to savers anticipating a rise in interest rates. Aldermore offers a six month fix at 0.91pc, as does Oaknorth at 0.75pc.
Ms Suter added: “If you do decide to wait it out and see what happens, make sure your money is in the best instant-access option now, rather than earning nothing in your current account. It’s not going to earn you millions but for the hassle of a few minutes shopping around and opening an account, it’s worth it."
Savers now have more deals to choose and the number of offers has risen for the sixth consecutive month, with 1,639 deals now available, the highest number since before the pandemic and the subsequent Bank Rate cut to 0.1pc.
Rates have also been improving over the past four months. The average longer-term fixed bond rate has surpassed 1pc for the first time since June last year.
Rachel Springall, of Moneyfacts, said: "As murmurings of a Bank Rate rise persist, variable rate accounts would typically be the first type of savings accounts to see improvements, but there is no guarantee for rates to do so immediately, or indeed have a rise passed on in full.
"It is difficult to know whether to switch or stay at this stage, but some savers may want to keep a part of their pot in a convenient place just in case."