2017 has been an interesting year for savers, characterised on the one hand by a number of improvements to best buy interest rates and on the other by higher inflation and a damp squib of a budget for savers last month.
Below is a round-up of the key events and changes that helped or hindered savers this year – as ever, if you have any thoughts or comments to add, please get in touch – we’d love to hear from you.
Interest rates
So, what has happened to interest rates in 2017?
In a nutshell, best buy rates have gone up, so savers looking for a new account are generally in a better position than they were at the beginning of the year.
Take easy access accounts for example – the best rate at the beginning of the year open to all was 1.00% gross/AER, whereas now the best rate without any withdrawal restrictions or introductory bonus is 1.30% with RCI Bank’s Freedom Savings Account – a whole 30% increase, so not to be sniffed at.
It’s a similar story with fixed rate bonds – the top one year bond at the start of the year was just 1.40% gross/AER, whereas today United Trust Bank offers 1.87% gross/AER – nearly half a percent better.
We have seen an increasing trend in each area of the savings market – so take a look at our best buy tables to see the current state of play, particularly if you are looking for an alternative home for your savings.
The only word of caution is that, whilst the trend overall is positive, in recent weeks we have seen a number of top-paying accounts pulled from sale – so it’s important to act quickly if you are interested in a particular account – it could be a case of blink and you’ll miss it.
Keep on top of the latest movements in the market with our Rate Alert emails – and if you’re languishing in a low-paying account, make the switch!
Finally, to keep an eye on your existing accounts and track any changes, make sure you’re using our free Rate Tracker service.
Bank of England base rate
Perhaps the biggest news for savers this year has been the increase in the Bank of England base rate, the first time this has happened in a decade.
Now that the dust has settled and we have seen what action (if any) has been taken by providers, it is clear that there have been both winners and losers amongst loyal savers.
Some existing rates have not increased by the full 0.25% rise, others have not increased at all and some, despite an increase, are still paying miserly rates.
Use our free Rate Tracker service to see what has happened to your existing accounts and if you don’t like what you see – switch to someone else. If a provider hasn’t rewarded your loyalty with a decent return, go elsewhere!
It is also fair to say that we haven’t seen best buy rates leap up as a result – after all it is the competition between the providers that is the key driver of the best interest rates on offer in the current market.
However, as mentioned earlier the general trend is positive and there are plenty of competitive options to switch to if you’re languishing in a poor-paying account. Take a look at our best buy tables for a full summary or feel free to contact us on 0800 321 3581 to discuss your needs further.
Inflation
On the other hand, hampering returns on savings has been the looming spectre of increasing inflation.
Starting the year at 1.80%, CPI has now risen above 3% and stands at 3.10%, according to November’s figures, which were released on Tuesday. Don’t forget that this is against the Government’s target of 2%.
What this means is that, generally speaking, returns on savings are struggling to keep pace with inflation. However, that doesn’t mean you should do nothing – by switching to the best possible returns, you are mitigating the effects of inflation and reducing its impact in the future.
FSCS limit
Perhaps the first major piece of news for savers in 2017 was the Financial Services Compensation Scheme (FSCS) limit changing back to £85,000 per person, per banking licence, from the previous level of £75,000. The increased limit took effect from the 30th January 2017.
It remains important to keep within the FSCS limit wherever possible, which can be tricky when a number of providers share a banking licence.
To check who your provider shares a licence with, take a look at our comprehensive guide to FSCS Licences or get in touch with us on 0800 321 3581.
ISA changes
There have also been changes to ISAs in 2017. From April the ISA limit was increased by a substantial amount and now stands at £20,000. Don’t forget –savers can put the full amount into a cash ISA in this tax year, so a significant amount to add to your tax-free savings pot.
For details of the current top rates, consult our Variable Rate Cash ISA and Fixed Rate Cash ISA best buy tables.
Another important change in 2017 was the launch of the Lifetime ISA (LISA) in April – a new type of ISA that allows those aged between 18 and 40 to save for their first home or retirement.
However, those looking for a cash LISA have been disappointed so far with just one provider, Skipton Building Society, offering one. And because of a lack of any competition, the interest rate of offer is very poor – just 0.75%, especially when compared to the similar Help to Buy ISA.
So, those interested in taking out a cash LISA, have a limited choice so far.
For the full lowdown, take a look at our free factsheet or get in touch.
NS&I changes
National Savings & Investments (NS&I) has also been in the headlines this year. In April it launched its Investment Guaranteed Growth Bond, paying 2.20% gross/AER for a three year term. At the time of launch, it was a market-leading rate and even now is only beaten by The Access Bank UK (2.25% gross/AER). However, whilst available to all, its low maximum balance of £3,000 perhaps affected its popularity, particularly amongst those with larger sums to invest.
More interestingly, at the start of December, NS&I relaunched the new Guaranteed Growth and Income Bonds for one and three year terms.
The pick of the bunch are the three year options, with the Growth Bonds paying 2.20% gross/AER and the Income Bonds paying 2.15% gross/2.17% AER.
The rate on offer is competitive in today’s market and is beaten only by The Access Bank UK (2.25% gross/AER).
However, the one year options are less compelling (1.50% gross/AER and 1.45% gross/1.46% AER respectively) and can be beaten by a number of bonds on the market.
For the full range of options, right up to a five year term, take a look at our Fixed Rate Bond Best Buy Tables or contact us for more information.
Who knows what changes we’ll see in the savings market in 2018, hopefully savings rates will continue the upward trend that we saw in 2017 and there may even be further changes to the base rate.
The key thing to note is that whatever happens in 2018, Savings Champion will be at the forefront of the latest interest rates and savings news. Look out for our regular Rate Alerts and Newsletters and we will bring you all the latest as soon as we have it. Please remember to forward anything of interest to any friends who you think might be interested.
One thing is for sure, it will remain as important as ever to not accept low savings rates – vote with your feet and switch to a better alternative, after all it is your pocket that stands to gain.
@savingschampion
Find us on Facebook