The Bank of England base rate has been steadily climbing since the end of 2021, and while that’s bad news for borrowers, it’s good news for savers. That’s because, after several years of earning next to nothing on their money, savers can finally take advantage of healthier interest rates.
With this in mind, we explore whether it’s worth switching to a tracker savings account to make the most of higher interest rates.
Key takeaways
- Tracker savings account track the Bank of England base rate.
- Some tracker accounts don’t allow withdrawals during the term.
- Many easy-access savings accounts track the Bank of England base rate.
- With cuts to the base rate, you might want to look at a fixed rate bond.
What are tracker savings accounts?
A tracker savings account is a type of savings account with an interest rate that tracks the Bank of England base rate. There aren’t many of these accounts on the market, but if you can find one, the interest rate on your account goes up when the base rate rises and falls when the base rate drops. This means they can be a worthy investment at a time when rates are rising.
How do tracker savings accounts work?
Tracker savings accounts often track at a fixed amount above or below the base rate, but in some cases, they might follow the base rate exactly.
As an example, if you had an account paying 0.5% below the base rate and the base rate was currently 5%, your account would pay 4.5%. If the base rate then rose to 5.5%, your savings rate would also rise to 5%. But if the base rate fell to 4.5%, your savings rate would drop to 4%.
Tracker savings accounts typically only last for a fixed term – say 2 years. Some accounts won’t allow withdrawals during this time, while others will, so be sure to check.
Is my money safe?
If your savings account is with a bank or building society authorised by the Financial Conduct Authority (FCA) or Prudential Regulation Authority (PRA), your savings will be covered by the Financial Services Compensation Scheme (FSCS) up to a limit of £85,000. This rises to £170,000 for joint accounts. FSCS protection means that if the bank or building society goes bust, you still get your money back.
Pros and cons of tracker savings accounts
Pros
- Your savings rate increases when the Bank of England base rate goes up
- Tracker savings accounts can often be opened with a small deposit
- Some accounts permit withdrawals, so you can move your money elsewhere if needed
Cons
- If the base rate falls, so will your savings rate
- Some accounts won’t permit withdrawals during the account’s term
- There are not many tracker accounts on the market
Bottom line
Choosing a tracker savings account can enable you to make the most of rising interest rates. However, it’s important to check the account’s terms carefully to find out whether the account tracks at a percentage above or below the base rate and whether you can make withdrawals.
What’s more, if you are thinking about applying for a tracker account, you should keep a close eye on what the base rate is expected to do. If the base rate is likely to fall in the coming months, you might be better off looking for a different type of savings account instead, such as an easy access account or a fixed rate bond.
More guides on Finder
-
Working from home statistics: How many people work from home?
Our research found that 41% of Brits work from home at least some of the time as of September 2024. We look at who is working from home and how working from home affects productivity.
-
Zopa savings account review
Compare Zopa’s savings accounts, including interest rates and accessibility.
-
Best savings accounts for April 2025
Find out more about the different types of savings accounts on offer.
-
How much money should I have in savings?
See how much money people your age have in savings, and learn how to boost your savings balance if it’s below average.
-
Compare savings accounts with compound interest
We look at the definition of compound interest, what it concretely means and how you can use it to grow your savings more quickly.
-
Raisin UK review
Raisin UK is a marketplace for savings accounts. Our review looks at how the platform works, as well as its pros and cons.
-
Best Virgin Money savings account rates compared
Thinking about getting a savings account with Virgin Money? We look at the options, from cash ISAs to regular savings accounts, plus pros and cons.
-
Newcastle Building Society: Savings accounts and interest rates
Looking to save with Newcastle Building Society? Our guide walks you through its different savings account options.
-
The Family Building Society: Savings accounts overview
The Family Building Society offers a range of savings accounts and junior savings accounts. Find out if one is for you or your family here.
-
Compare high interest & high yield savings accounts
Kickstart your savings plan with a high interest savings account.