It’s been four weeks since my last Rates Rundown but the good news is that there is a lot of good news! Whilst it has not been as busy as June, July has certainly seen things continuing in the upward direction. But with the latest inflation figures illustrating that the Bank of England’s activity is beginning to take effect, are things going to change?
RATES ARE CORRECT AS AT THE TIME OF PUBLICATION (11am 21/07/2023). All up-to-date rates can be found on our Best Buy tables.
Let’s start with the Easy Access table.
A month ago when I finished my last Rates Rundown, I couldn’t believe that the top rates were paying up to 4.21% - so imagine my delight to see that rates have increased even more while I was on holiday!
Newcastle Building Society was offering a tracker account that guaranteed to pay no less than 0.70% below the base rate, so that set the scene after the base rate increased to 5% as it leapt to the top of the easy access table paying 4.30%. But such a compelling account was bound to be popular and was withdrawn quickly, leaving Paragon in the top spot with its Triple Access Saver paying 4.25%. More good news though, as Principality upped the rate on its Online Double Access Saver 2 to 4.30% but the Family Building Society next took the top spot with its Online Saver (5) paying 4.35%.
That was not the end of the good news though as Principality moved its rate up again to 4.45% AER to regain its top spot – but it wasn’t to stay there for long. Oxbury Bank upped the rate on its Personal Easy Access Account Issue 1 to 4.46%, then the Coventry Building Society launched a new restricted access savings account – Four Access Saver (Online) (2) paying 4.50%.
DF Capital was the next provider to make a move, jumping straight to the top of the table with Issue 2 of its Easy Access Account paying 4.55%. However, the account was only on sale for a couple of days and is now closed to new customers. The good news is that Chip increased the rate on it Instant Access Account for both new and existing customers to 4.51%. Then Shawbrook upped the rate on Issue 36 of its Easy Access Account to 4.52% - then Chorley Building Society launched Easy Access Saver Account (1 Withdrawal) paying 4.65% AER. But be aware that as the name suggests, you can make just one penalty free withdrawal a year. Any more and the rate will reduce to pay the same as the provider’s Instant Access Account which is currently paying 2.35% AER.
I simply can’t believe how high fixed term bond rates have risen to over the last few weeks, especially over the shorter term. When I wrote our last Rates Rundown, the top 1-year rate was 5.76%, and I wondered just how much higher things could go. As it happens, it seems like quite a lot more, although as we head into the weekend, things have noticeably slowed a little, following the inflation news earlier this week. Let’s take a whistle-stop tour of the different terms.
1 Year
Charter Savings Bank was the first provider to break the 6% ceiling, right at the end of June, but that triggered another round of competition between a number of providers. Allica Bank was the next to make its move followed by Close Brothers, Investec and of course Smart Save - then First Save launched a bond paying 6.10%, knocking all the others out of the way. It was short lived though and there was a short period where we actually saw some providers reducing the rates on offer, although all of the top five were and are paying more than 6%. Castle Trust was the next provider to make a statement, offering a 1-year bond paying 6.20% - but once again, this was around for the shortest of times, being withdrawn the same day.
And then Vanquis took over the top spot with a bond paying 6.15% but as expected this was removed at the end of the week, leaving Atom at the top paying 6.05% AER.
I think we may be near the top of the cycle now, so if you’ve been procrastinating, you might want to get on and open any account that you see which looks attractive.
2 Years
It’s been a similar story in the 2-year table with the turnover of the bonds in the table regularly all changing.
As with the 1-year table, at the time of the last Rates Rundown, the top 2-year bond was also paying 5.70% - so actually slightly less than the top 1-year. But there has been plenty of activity to drive rates up.
Again, it was Charter Savings Bank to take the top rates over 6%, with a 2-year bond paying 6.10% and an 18 months bond paying 6.01%. Close Brothers also briefly joined the 6% club with a bond paying 6.05% - but these accounts were all short-lived and there was a bit of a lull before First Save burst into the 2-year table with a bond paying 6.15% AER – and this boosted competition so that within a couple of days all of the top five were paying 6% or more, although no-one challenged First Save for the top place. When First Save was withdrawn after a few days, Tandem Bank took over the mantle also paying 6.15% on an 18 month bond and remained in its lofty position until earlier this week when Vanquis overtook with a bond paying 6.20% - slightly more that it’s top 1-year bond.
However, as with the 1-year table, this was withdrawn at the end of the week, this time leaving Tandem back at the top.
3 Years
The 3-year table has been a little quieter in terms of activity, but the top rates did eventually breach 6%, although never all five on the table.
This time it was Investec, via the Raisin platform that jumped to the top paying 6.06% - with all the other bonds lagging behind paying 5.96% and 5.95% AER. But RCI, then Vanquis upped their offerings to take the top three over 6%, but still paying less than the shorter-term bonds.
Although the rates are a bit lower, surely if inflation continues it’s downward trajectory, if you are locking away for three years or more, there must come a point that you’re earning more than inflation for at least some of the term?
5 Years
There’s even less to report on this table, although once again the top rate on offer briefly breached 6% but after a couple of days things fell back away. That said, as we head into the weekend, the top rate of offer has improved from 5.55% at the end of June, to 5.80% at the time of writing, which once again is lower than the top short term fixed rates.
This is another indication that the financial markets are expecting the base rate to peak and then fall away somewhat over the next few years.
The latest inflation figures have clearly changed market sentiment. Whether we have now reached the peak, we’ll have to wait and see. Next time, I am going to review what’s been happening to cash ISA rates, as with the Personal Allowance being utilised with lower and lower deposits, ISAs are once again an important tax free option. But with rates often lower than the equivalent bonds, are they worth considering?
@savingschampion
Find us on Facebook