Should you lock into a fixed-rate account? After Martin Lewis issues 'urgent warning'

Savers have been warned to hold off from locking into a fixed-rate account in the wake of the latest announcement on interest rates.

The Bank of England (BoE) on Thursday left rates unchanged for the first time in nearly two years.

A flurry of activity from residents has been prompted by the announcement.

Now, MoneySavingExpert founder Martin Lewis has weighed in on the conversation, issuing an "urgent savers warning".

What does this mean and should you be committing to a fixed-rate account? ITV News explains.

What's happened to interest rates?

The BoE has announced that it has left interest rates at 5.25%, marking the first time since December 2021 it has not chose to increase them.

Rates had been expected to continue growing, but falling inflation prompted the Monetary Policy Committee (MPC) to buck that trend.

BoE Governor Andrew Bailey, who voted to keep the rate unchanged, said: "Inflation has fallen a lot in recent months, and we think it will continue to do so.

"That's welcome news. But there is no room for complacency. We need to be sure inflation returns to normal and we continue to take the decisions necessary to do just that."

Should you lock into a fixed-rate account?

Mr Lewis suggested that those considering whether to lock into a top fixed-rate account could use a tactic which would given them more time to see what happens to rates.

Writing on the social media platform X, formerly known as Twitter, he said the move could be used to "play it both ways".

"Open the fix today, but don't fund it [you've usually seven to 14 days to do that]," he said.

"Just hold it so you've got it available, and you can wait and see what happens to rates. If they go the other way, just don't fund the facility you've opened now - that's not a problem."

How have savers reacted recently?

Savings rates have surged in recent months as the base rate has increased.

Earlier this week, NatWest said the number of fixed-term accounts opened in the first half of 2023 was around 17 times the total it recorded in the same period in 2019.

More than 82,000 fixed-term savings accounts were opened in the first half of this year, the bank said.

This compares with 4,700 in the first half of 2019, according to NatWest's data.

Nationwide Building Society, which launched a regular saver account on Thursday with 8% interest, has also previously reported seeing a jump in people snapping up fixed-rate deals.

Tom Riley, director of retail product at Nationwide, said earlier this week: "In recent months we have seen an increase in people taking out our fixed-rate accounts.

"Given the rates on offer we have found savers are increasingly willing to lock their money away for a period."

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: "If your current fixed-rate deal doesn't come to an end for a while, don’t lose faith.

"The Bank of England's insistence that the fight against inflation is ongoing means we could see more rises further down the line, and at the very least is likely to mean it keeps interest rates higher for a considerable period."

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know...