Variable Rate
What is a variable rate?
A variable rate is an interest rate (the percentage a bank pays you for keeping savings with them) that can change. The bank can raise it or lower it whenever they want, usually with little or no notice. Most easy access savings accounts have variable rates.
Why do variable rates change?
Banks often adjust their rates when the Bank of England changes the base rate. If the base rate goes up, savings rates often follow. If it goes down, your rate probably will too.
But banks aren’t required to match the base rate. They can change their rates whenever they like, for any reason.
What’s the risk?
You might open an account with a great rate, then find it’s been cut a few months later. Some banks use high “introductory” rates to attract customers, then quietly drop the rate after a year.
Check your rate occasionally. If it’s dropped, consider switching to a better account.
Variable rate vs fixed rate
A fixed rate is guaranteed for a set period. It won’t change no matter what. The trade-off is you usually can’t access your money until the term ends.
Variable rates give you flexibility. Fixed rates give you certainty.
Key points about variable rates
- Can change at any time. The bank decides
- Often follows the base rate, but not always
- Check your rate regularly. It might have dropped
- Trade-off: flexibility vs certainty
More information
Scrimpr links to official sources so you can verify what you’ve learned.