April's summary from the savings team

30th April 2014

An interesting development this month has been the increased fixed rate offerings among a small group of providers. The main early mover was Shawbrook Bank who increased their 1 year, 18 month and 2 year fixed rate bonds to add to their already market leading 3, 4 and 5 year bonds. Their monopoly was broken by Close Brothers who released new 2 year (2.40%) and 3 year (2.70%) bonds. Shawbrook then made a surprise move, increasing their 1 year fixed rate bond, which was already a best buy, to 1.95%, an almost unheard of move in the current market, where providers are more likely to reduce top rates as they become too popular. The latest provider looking to attract funds is Vanquis Bank, pipping the Shawbrook 4 and 5 year deals by just 0.01% (2.86% and 3.11% respectively). This small glimpse of competition among fixed rate bonds gives us reason for cautious optimism for the future.

Also this month, two new high interest-paying current accounts were launched, continuing to demonstrate the popularity of this type of account with both savers and providers alike. TSB Bank launched the Classic Plus Account, paying 5% AER on balances up to £2,000. On virtually the same day, Lloyds Bank launched the Club Lloyds Current Account, paying up to 4% AER (applicable to balances between £4,000 and £5,000). As many savers are using this type of current account to maximise the amount of interest they receive, it is good to see more options in the market.

As noted in our previous Newsletter, decent new ISAs have been few and far between, even at a time where traditionally, providers compete for savers’ ISA funds. Nationwide released a Regular Saver ISA, which was an unusual move given that there are not many of this type of ISA on the market at the moment, suggesting that they may not necessarily be very popular with savers. The account itself is attractive as it pays 2.57% tax free, easily the best rate available among easy access ISAs at the moment and there is no obligation to pay in every month. This means that the account is ideal for those looking to deposit smaller amounts, although it won’t suit those with the full allowance to deposit straight away or those looking to transfer in previous ISAs. An interesting feature of the account is that from the 31st March 2015, the account will be transferred to a standard easy access ISA and for the month before, account holders will be allowed to top-op the ISA up to the £15,000 allowance that will apply at that time.

About the only increased offering of note among variable rates this month has come from Santander. The Direct ISA Saver Issue 6 (1.60%) was replaced by the 123 Direct ISA (Issue 7) paying 1.70% tax free/AER. However, the new account is only available to customers that have or open a 123 current account, 123 credit card or for Santander Select customers. So, although the rate has increased, it has only done so for selected customers, so not great news for everyone.

Last but not least is a new 2 year fixed rate account from Melton Mowbray Building Society. Suitable for those looking for monthly interest, the Melton Almshouses Affinity Savings pays 2.10% gross/2.12% AER and you also get to help a good cause at the same time, as the provider will contribute money to the charity, based on the balance in each account.

We will, of course continue to keep you informed of new accounts as they hit the shelves via our Rate Alert service and we hope to share some more positive news in the coming weeks and months. In the meantime, make sure you register your accounts on our free Rate Tracker Service if you haven’t done so already. 

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