Tuesday, August 16, 2022
HomeBusinessSavings rates finally start to rise as banks fight for customers' cash

Savings rates finally start to rise as banks fight for customers' cash


Savings deals finally start to rise in wake of last month’s base rate hike as banks battle for customers’ cash

Renewed competition for savings has led to more than 2,850 rate rises in the last six weeks.

New banks and building societies are fighting for customers’ cash after last month’s base rate rise from the Bank of England. 

There have been no fewer than 1,790 increases in variable-rate accounts with top easy-access deals now paying more than 0.7 per cent.

Rate rises: There have been no fewer than 1,790 increases in variable rate accounts with top easy-access deals now paying more than 0.7%

Rate rises: There have been no fewer than 1,790 increases in variable rate accounts with top easy-access deals now paying more than 0.7%

On top of that, more than 1,000 new fixed-rate bonds and cash Isas have been launched with better rates, research from website Savings Champion shows.

Rachel Springall, from data analysts Moneyfacts, says: ‘The newer banks are increasing rates daily. 

We expect them to continue to edge up.’ Short-term one-year fixed-rate bonds have broken through the 1.8 per cent barrier, three times the 0.6 per cent on offer a year ago.

Such low rates led savers to abandon fixed-rate deals in their droves and look to easy-access accounts. So is now the time to consider bonds again?

The base rise to 0.75 per cent last month is unlikely to be the last this year.

James Blower, co-founder of consultancy The Savings Guru, says: ‘I don’t see rates rocketing upwards but March saw strong increases across the board. Competition will continue to nudge them upwards.’

There are now 14 providers which pay 0.7 per cent or more on easy-access accounts. And last week savers in the popular Marcus account, run by Goldman Sachs, saw their rate rise to 1 per cent.

The best one-year fixed rate bond is more than double this at 1.86 per cent with Cynergy Bank, followed by Zopa at 1.81 per cent and a host of providers including Close Brothers, Invested, Oxbury and Tandem Banks at 1.8 per cent.

Anna Bowes, co-founder of Savings Champion, says: ‘If you switch some money into a short-term fixed-rate bond, you will earn more interest straight away rather than having to wait for easy-access rates to go up.’

New banks tend to offer accounts online only. But Charter Bank pays 1.61 per cent on its one-year fixed bond by post or online.

Leeds BS pays 1.2 per cent, more than double its 0.35 per cent easy access rate, on its one-year bond — available through its branches or by post, phone and online.

Big banks still pay a pittance. HSBC pays 0.25 per cent fixed for a year, while at Barclays and Santander the rate is as low as 0.3 per cent. For a two-year bond both Halifax and Lloyds pay 0.4 per cent.

Most big banks continue to pay 0.1 per cent on easy access accounts and a huge 49 pc only pay base rate or below.

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