🔔 Savings Rate Rundown

Here are some of the latest movements in the market.

Vanquis Bank has launched new versions of its 1, 2, 3 and 5 year fixed rate bonds, offering higher interest rates than the previous versions. The 1 year fixed rate bond now pays 1.86% gross/AER (the previous version was 1.61%), the 2 year bond is paying 2.11% gross/AER (the previous version was 1.76%), the 3 year bond is paying 2.46% gross/AER (the previous version was 2.26%) and the 5 year fixed rate bond is paying 3.02% gross/AER (the previous version was 2.80%).

Vanquis Bank already had a market leading 4 year fixed rate bond paying 2.61% gross/AER and has now increased the rate available for 5 years, so the provider is now top of both longer term fixed rate bond tables. It is also interesting to note that as a result of these improvements, the provider is now competitive for each of the main fixed rate bond terms (1 to 5 years), which is rare to see in the savings market. Yet again the Challenger Banks are leading the way, with the more established brands left even further away from the best buy tables.

Charter Savings Bank launched a new version of its 1 Year Fixed Rate Bond paying 1.91% gross/AER, replacing the previous version, which paid 1.75% and then two weeks later launched another new version at 2.00% gross/AER. In between these changes, the provider launched a new version of its 2 Year Fixed Rate Bond paying 2.16% gross/AER, replacing the previous version which paid 2.00%.

When launched, both of these bonds went straight into the best buy tables and were both sitting in second place for their respective term after Punjab National Bank (2.00% gross/AER for 1 year and 2.30% gross/AER for 2 years), marginally beating the next best rates. The subsequent improvement to the 1 year bond means that it is now joint market leader. Having only launched in March this year, Charter Savings Bank has already made a name for itself, appearing regularly in both the fixed rate bond and notice account tables, often with multiple accounts and terms. As we have seen time and again, it is the challenger banks, like Charter Savings Bank providing the competition in the savings market, without whom the situation could be far worse for savers.

Charter Savings Bank has also launched a new 120 Day Notice Account (Issue 3) paying 1.90% gross/AER.

This new notice account is market leading, beating Secure Trust Bank (1.90% gross/1.91% AER) into second place, by virtue of having no withdrawal restrictions. The provider currently dominates our Notice Account Best Buy Table, occupying 3 of the 5 available positions with a range of different notice periods. This further cements the provider’s reputation as one to watch and it will hopefully continue to launch new best buy accounts going forward.

As mentioned above, Secure Trust Bank has increased the interest rate to 1.90% gross/1.91% AER on its 120 Day Notice Account (Issue 13), affecting both new and existing account holders. The account previously paid 1.85% gross/1.86% AER. Account holders are restricted to a maximum number of four interest withdrawals and three capital withdrawals per calendar year.

The new gross rate matches the above account from Charter Savings Bank and could be seen as a reaction to losing top spot in the best buy tables. Good news for those already holding this account, who have also benefitted from the rate increase, which is rare at the moment. Most providers have been cutting rates for existing account holders. The key point to note is that the number of withdrawals you can make in a year is restricted, in addition to having to give notice, which will not suit everyone.

Paragon Bank has launched new versions of its 1 and 2 year fixed rate bonds, paying higher interest rates than the previous versions. The 1 Year Fixed Rate Bond pays 1.85% gross/AER (the previous version was 1.65%) and the 2 Year Fixed Rate Bond pays 2.20% gross/AER (the previous version was 2.00%).

Whilst the new interest rate for the 1 year term is not quite sufficient for the provider to break into the top five bonds for the term, the 2 year bond is more competitively priced. The new 2 year rate now sits in second place after Punjab National Bank (2.30%), replacing Charter Savings Bank’s recently increased offering (2.16%). Yet more competition in the fixed rate bond market, provided by a challenger bank.

Hampshire Trust Bank has launched a new version of its 3 year Bond (Issue 4) paying 2.50% gross/AER, replacing Issue 3, which paid 2.35%.

In this instance, the provider is improving on a bond that was already in the top five for the term. This suggests that they are not content to just have a competitive rate available, but want to provide savers with an even better deal. The account is now second only to Punjab National Bank (2.55%) amongst 3 year fixed rate bonds.

Kent Reliance has launched a new online easy access account issue 1, paying 1.45% gross/AER on balances above £1,000. The provider has also launched a 1 year fixed rate bond issue 32 paying 1.95% gross/AER, replacing issue 31, which paid 1.85%.

With few changes happening in the easy access best buy table since the launch of the current market leader from BM Savings (1.50%) at the end of May, a new entrant into the top five is welcome news. The rate is next best after the market leader and unlike that account does not include an introductory bonus, so may appeal to those who would prefer not to have to look at alternative accounts after the initial period. The provider has also launched a more competitive version of its 1 year fixed rate bond, in keeping with some significant recent action in this area. The new version of the account sits just behind the current market leaders, Charter Savings Bank and Punjab National Bank (both paying 2.00%).

Shawbrook Bank has launched higher paying versions of its 1, 2 and 3 year fixed rate cash ISAs. The 1 Year Fixed Rate Cash ISA Bond Issue 6 pays 1.65% tax free/AER (the previous version was 1.60%), the 2 Year Fixed Rate Cash ISA Bond Issue 7 paid 1.80% tax free/AER (the previous version was 1.75%) and the 3 Year Fixed Rate Cash ISA Bond Issue 3 pays 2.00% tax free/AER (the previous version was 1.95%). A second recent increase to the 2 year fixed rate cash ISA has meant that the rate available on the new Issue 8 is now 1.85% tax free/AER.

It is encouraging to see a provider make improvements to its fixed rate ISAs outside the traditional ISA season and this may give hope to those who have yet to find a suitable home for this tax year’s ISA allowance. The new rates are competitive, with the 1 and 2 year ISAs both paying market leading rates and the 3 year ISA beaten only by the State Bank of India (2.10%). Having previously been known for its competitive fixed rate bonds and notice accounts, it is good to see this provider making waves in the cash ISA market, having only started offering them this year. Many of the challenger banks do not currently compete in this area of the savings market, but hopefully Shawbrook’s success will encourage others to follow.

Shawbrook Bank has also recently launched new versions of its notice accounts, with higher rates than the previous versions. The new 120 Day Notice Account (Issue 28) is paying 1.75% gross/AER (the previous version was 1.60%) and the 95 Day Notice Account (Issue 17) is paying 1.65% gross/AER (the previous version was 1.55%).

Following up its fixed rate ISA improvements, it was then the turn of Shawbrook’s new issue notice accounts to be increased. Notice accounts are a key area of the savings market for challenger banks like Shawbrook and the provider has been consistently competitive in this category over the last few years. The 120 Day Notice Account is now the third highest paying notice account currently on the market after Charter Savings Bank and Secure Trust Bank.

·         Challenger Banks continue to dominate the best buy tables with most high street providers taking a back seat, offering little in the way of competitive deals for savers. If you want further information about this new breed of banks, you can find out more in our new Guide to Challenger Banks.

Generally at this time of year, there are fewer changes made amongst cash ISAs, as we move further away from the start of the 2015/2016 tax year. However, in addition to the fixed rate cash ISA improvements from Shawbrook Bank mentioned above, there have been other providers making changes to their ISA ranges, with mixed results.

Virgin Money has launched new versions of its fixed rate cash ISAs with improved interest rates. The provider’s 1 year fixed rate ISA is now paying 1.61% tax free/AER (the previous version was 1.51%), the 3 year fixed rate ISA is paying 2.00% tax free/AER (the previous version was 1.90%), the 5 year fixed rate ISA is now paying 2.35% tax free/AER (the previous version was 2.15%).

With these improvements, Virgin Money has moved nearer to the top of the best buy tables and now sits in a healthy second place for each of the three terms. The 1 year ISA, sits next in line after the market leading rate of 1.65% (from both Nationwide and Shawbrook Bank) and the 3 and 5 year ISAs are paying the next best rate after State Bank of India (2.10% for 3 years and 2.50% for 5 years).

Virgin Money has re-launched it Defined Access Saver/E-Saver paying 1.41% on balances of £1. The maximum is £250,000. This is an easy access account but the rate drops to 0.75% if four or more withdrawals are made per calendar year.

Another easy access account which has jumped right back into the best tables and now sits in 3^rd place. However there are restrictions on the number of withdrawals allowed per year and if you make four or more, the rate will almost half until the end of the year. So it’s not appropriate for those who want to make regular withdrawals.

Skipton Building Society has replaced its range of fixed rate cash ISAs with new versions.

The 1 Year Fixed Rate Cash ISA was paying 1.62% and the new version pays 1.40% tax free/AER. The 2 Year Fixed Rate Cash ISA has also reduced, paying 1.70% tax free/AER, having previously paid 1.80%. The 3 and 5 Year Fixed Rate Cash ISAs have both gone up, now paying 2.00% tax free/AER and 2.30% tax free/AER, having previously paid 1.95% and 2.10% respectively.

A definite mixed bag here, with disappointing reductions for the shorter terms, but better news for the longer term ISAs. The 1 and 2 year fixed rate ISAs were both competitive before the change, indeed the 1 year ISA was market leading at one stage, but now has dropped out of the running. Both the 3 and 5 year ISAs sit comfortably in the top five for the respective terms. So whilst it is not all good news, the longer term ISA improvements are certainly a welcome sight.

State Bank of India has withdrawn its 1000 Days Cash ISA Fixed Deposit paying 2.30%. A new 3 Year Cash ISA Fixed Deposit has been launched paying 2.10% tax free/AER, which is the highest paying 3 year fixed rate ISA on the market.

On the one hand, it extremely disappointing to see a market leading rate disappear, at least the replacement is a top rate, so the provider is still maintaining a healthy position in the best buy tables.

As many savers still look to the high street to find a place for their savings, it is worth looking at the latest changes made by these well-known providers to see what is currently on offer.

Santander has withdrawn its 2 Year Fixed Rate Cash ISAs, replacing them with new versions paying lower interest rates. The 2 Year Fixed Rate ISA, exclusive to 123 account holders, was paying 1.65%, the new version is 1.50% tax free/AER. The 2 Year Fixed Rate ISA, open to everyone, was paying 1.40% and the new version is 1.25% tax free/AER.

Halifax replaced a selection of its fixed rate bonds and fixed rate ISAs with higher paying versions. The 1 Year Fixed Saver was paying 1.05% and the new version pays 1.40% gross/AER. The 3 Year Fixed Saver was paying 1.40% and the new version pays 1.75% gross/AER. Finally, the 1 Year ISA Saver Fixed, paying 1.25% was replaced with a new version paying 1.40% tax free/AER.

Nationwide has launched a new Loyalty 2 Year Fixed Rate Bond/e-Bond paying 2.00% gross/AER. To qualify individuals must have been a continuous member of the society for at least one year or be applying for the bond as part of a fixed rate bond maturity process.

The rates are significantly better than the standard versions, so in that respect Nationwide are offering a better deal to their existing customers. However, when you compare the rates to the current best buys, there are still much better paying deals available elsewhere.

Nationwide has also launched new versions of its fixed rate bonds and 1 year fixed rate ISA paying higher interest rates than the previous versions. The fixed rate bond interest rates range from 1.10% gross/AER for 6 months to 2.00% gross/AER for 3 years, with improvements of up to 0.35% made. The 1 year fixed rate ISA has been increased from 1.60% to 1.65% tax free/AER, for new accounts opened.

Whilst it is good to see some high street providers making improvements, with the exception of the 1 year fixed rate ISA from Nationwide, the new rates are not competitive. Whilst it is positive to see some better rates and this is good news for those who prefer to stick with the well-known names, savers could get better returns, in many cases, if they move away from these providers. As long as the provider is a member of the Financial Services Compensation Scheme (FSCS) and fully regulated and authorised by the FCA and PRA, then alternatives could be considered, especially if you keep within the £85,000 FSCS limit. 

If you need any further information on any of the accounts featured above or any of the providers mentioned, please get in touch. Our savings experts are available to help and advise you, as well as answering any savings questions you may have. Call us free on 0800 321 3581.

Also, if you have any feedback about a provider’s customer service or you have any experiences to share – good or bad, please get in touch.