The Bank of England base rate has returned to 0.75% which is the level it was at before the Covid-19 pandemic changed our lives and made a poor situation for savers into an impossible one. So, with base rate at 0.75%, surely this means that all savings rates will have returned to pre-pandemic levels?
Unfortunately not!
The Bank of England last raised the base rate to 0.75% in August 2018 and just before that increase, the average rates of easy access accounts that were available to be opened was 0.41%, rising to 0.54% as the base rate increase filtered through. However, after the base rate was cut twice in March 2020, taking it to a record low level of 0.10%, the average easy access rate fell to as low as 0.12% in the middle of last year. So now that we’ve seen the base rate rise three times, we would hope that this average rate would at least be back to where they were in early August 2018
It’s circumstances like this that tends to see savers’ losing out and this is no exception. The current average rate of live easy access accounts is just 0.29% - a long way from where it was before. Which means that there are plenty of savings providers out there who took full advantage of the rate cuts – but have not done the right thing as the base rate has climbed back up. And I’m afraid it’s the high street banks that, as usual, are setting a very bad example.
While the biggest high street banks have all now announced some increases, they all appear to have ignored the fact that there have been three base rate rises totalling 0.65%. Even after the increases they have made to their easy access accounts, they are still only paying 0.10% - that’s £1 in interest per year, for every £1,000 deposited.
There is good news for those who shop around
The good news is that at the other end of the spectrum, the best buy easy access rates are firmly back to pre-pandemic levels. And much of this is surely down to another US bank entering the UK retail market with a splash!
American bank JP Morgan has launched a UK version of its retail bank, Chase, and as well as launching a current account, it has launched an easy access account that is available to those who open the current account, paying 1.50% AER – almost doubling the best rate that was available a month ago and the highest easy access account available since September 2019.
But of course there are some things to look out for. For starters, you do need to open or already have the Chase current account but, you don’t need to switch your main current account and don’t even need to set up any direct debits etc in order to access the savings account – and the maximum balance of the Chase Saver Account is £250,000.
Another thing to be aware of is that the maximum that can be withdrawn from the account is £25,000 a day – not a problem for most people but if you are squeezing as much interest as you can before your cash is needed for a significant purchase, it’s important to be aware of these things. You need to always read the small print and make sure that any savings account you open is fit for purpose.
The entry by Chase into the market has seen a bit of a shake up and at the time of writing all of our top five easy access accounts are paying 1% or more! Cynergy Bank has recently launched a new issue of its Online Easy Access Account (Issue 49) which is paying 1.10%, while both Tandem Bank and Al Rayan have increased the rates on their Easy Access offerings, with Tandem's Instant Access Saver now paying 1.10% AER and Al Rayan's Everyday Saver Issue 2 paying 1.01% Expected Profit Rate, for both new and existing savers.
With an astonishing £983 billion in easy access accounts, much of which will be earning minimal interest with the high street banks and a further £265 billion languishing in current accounts* paying no interest at all, let’s hope this competition continues and that this encourages people to switch from the banks that are robbing them.
* Source: Bank of England
@savingschampion
Find us on Facebook