New account launches with increased interest rates are higher than the number of launches with lower rates so far this year, with 33% of all new launches seeing a rate rise rather than a rate cut.
The trend reverses what has been seen in recent years and means savers who have been struggling to get better rates on their savings are at last getting new hope that things are starting to improve. There could even be the first hint of a rate war in the offing.
It is very encouraging, because while the challenger banks have brought out increased rates over the years to entice savers away from the big banks, this feels a bit different. While these are just small improvements at this stage, hopefully this could lead to a bit more of a sustained battle.In the last couple of weeks the Post Office launched its Online Saver Issue 23 going up from 1% to 1.01% AER, and RCI immediately reacted to this and increased its Freedom Savings Account to 1.01% AER as well. Following this, Hanley Economic has launched its easy access Monthly Income Saver paying 1.05% AER on a minimum balance of £25,000. Plus, Nottingham Building Society increased the rate on its eSaver Issue 6 from 1% to 1.02% AER, which in turn saw RCI make a second increase this month – now its Freedom Savings Account also stands at 1.02%
But this battle is not just restricted to easy access. In the fixed rate bond market, Atom Bank introduced 3 year and 5 year bonds to its stable – going straight into the best buy tables with 1.70% (3 years) and 2.05% (5 Years).
But savers need to be aware and make the right choices with their money. Although only around 19% of account launches have seen falls so far this year, compared to over 60% in January 2016, there are many more accounts that are now paying appalling rates. Six months ago, just 10 variable rate accounts were paying 0.01% but currently 33 accounts are paying this paltry rate. This will soon rise to 35, as HSBC has stated it will be reducing its rates on its Instant Access Savings and Flexible Saver accounts from 0.05% to 0.01% from January 25.
But even more shockingly, nearly 20% of all easy access accounts are paying 0.05% or less.
These rates are dreadful, so savers who find out they are with a bank that is paying them so little should really vote with their feet. If you have £10,000 to deposit, you have a choice of getting £1 a year, or £102 a year – I know which most people would want.
If we are seeing the start of a rate war, then it can only be good news for savers. However, we do appreciate that many will think that small moves in rates are not worth their while doing the paperwork – but we would strongly disagree! Any increase in savings interest in the current environment is worth chasing, especially if you are stuck in one of the worst paying accounts out there at just 0.05% or even less.
However, if you prefer someone else to do the work for you, then it would be worth considering our Concierge Service if you have more than £100,000 on deposit across all your accounts. You could earn up to 3.5 times the amount of interest you currently receive and we will deal with all the administration for you.