December's rates rundown

13th December 2016

Speculation continues on whether 2017 will be the year we see an increase in the Bank of England base rate and in turn increased interest rates and the early signs are encouraging, as we have seen a number of improvements to savings rates over the last few weeks, particularly amongst fixed rate bonds.

Inflation is expected to rise during 2017 and higher inflationary pressures could lead to pressure on the Bank of England to increase the base rate, which may then lead to improved interest rates. Of course, a change in the base rate is not the only factor when it comes to improved interest rates and it is often competition between providers and their desire to bring in funds that pushes rates upwards and this is what we have started to see in the last few weeks.

New market leading fixed rates have been launched by Hanley Economic Building Society and the newly launched Masthaven Bank and new best buys from OakNorth Bank.

In addition to Masthaven, we have also seen Zenith Bank (UK) Limited launch, with some competitive new fixed rate bonds.

Also, it has not just been all about fixed rate bonds, with some positive moves in the easy access best buy table from the likes of Tesco Bank and Leeds Building Society.

All of which adds up to a more positive end to 2016, following several unexpected major events during the year. Good news for savers is long overdue and we are cautiously optimistic that next year will see rates going back in the right direction.   

Hanley Economic Building Society has entered our fixed rate bond best buy tables with a market leading 3 year fixed rate bond. The bond pays 1.65% gross/AER and can be opened in branch or by post with a minimum of £1,000. Up to £50,000 can be deposited into the account.

It is unusual to see this building society in our best buy tables, but it is certainly a welcome sight, in fact it is unusual to see a building society competing actively in the fixed rate bond market, an area dominated by newer challenger banks.

OakNorth Bank has launched an improved range of Fixed Term Deposits, which both the 1 year and 2 year bonds entering our Fixed Rate Bond Best Buy Tables. There are also less common terms for those looking for something a bit different.

12 Month Fixed Term Deposit – 1.36% gross/AER

15 Month Fixed Term Deposit – 1.40% gross/AER

24 Month Fixed Term Deposit – 1.55% gross/AER

30 Month Fixed Term Deposit – 1.60% gross/AER

Accounts can be opened online with a minimum of £1,000 and you cannot access funds within the term.

We have also in the last few weeks seen two providers launch in the UK savings market and make their debut in our best buy tables, which is an encouraging sign and provides even more competition and may even shake up some of the existing providers.

Firstly, Zenith Bank (UK) limited launched a range of fixed rate bonds for 1, 2 and 3 years. Each of the bonds have featured in our Fixed Rate Bond Best Buy Tables and the rates are below.

1 Year Fixed Term Deposit – 1.30% gross/AER

2 Year Fixed Term Deposit – 1.52% gross/AER

3 Year Fixed Term Deposit – 1.60% gross/AER

Accounts can be opened with a minimum of £1,000 and you cannot access funds within the term.

Then Masthaven Bank marked its arrival in the market with a set of competitive fixed rate bonds, the most eye-catching of which was a market leading 5 year fixed rate bond. More information on this provider can be found in the latest in our Provider Focus Series.

Interestingly, the provider allows you to choose your own fixed term, which means you can choose the exact term, up to five years, with the interest rate adjusted accordingly. For more information and to look at the rates on offer, please see Masthaven Bank's website.

Alternatively, you can just choose from a range of standard terms, with the interest rates as follows;

1 Year Fixed Term Deposit Account - 1.35% gross/AER
2 Year Fixed Term Deposit Account - 1.53% gross/AER
3 Year Fixed Term Deposit Account - 1.61% gross/AER
4 Year Fixed Term Deposit Account - 1.81% gross/AER
5 Year Fixed Term Deposit Account - 2.01% gross/AER

Whilst most of the action in the last few weeks has been in the fixed rate bond market, there have been some encouraging signs amongst variable rates too, with several new best buy easy access accounts launched.

Tesco Bank launched a new version of its Internet Saver account, which matches RCI Bank and NS&I at the top of the easy access best buy table. The account can be opened online with a minimum of £1 and pays 1.00% gross/AER, which includes a 0.60% bonus for the first 12 months.

Following hot on the heels of Tesco Bank, Leeds Building Society has made a rare appearance in our easy access best buy table, also paying a joint market leading 1.00% gross/AER. The account matures on 2 January 2018, after which the funds are transferred to an alternative account and accounts can be opened online with a minimum of £5,000.

So, some positive moves amongst variable rates as well and although the interest rates are not where we would like them to be yet, this is at least a step in the right direction.

If you would like to discuss further options or would like any help with your savings, please get in touch. Our Bath-based savings experts would love to hear from you, so call us on 0800 321 3581. 

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