How the savings market looks this week.
The last few weeks have seen some positive signs, possibly pointing towards the start of a better period for savers. Last week it was the launch of the highest 1 year fixed rate bond in nearly two years, this week we have seen the highest paying best buy notice account launched since June 2013.
A mini battle between Charter Savings Bank and Secure Trust Bank in the notice account category has boosted the rates on offer, with first Charter Savings Bank taking the lead, only to be matched by Secure Trust Bank the very next day. However, Secure Trust Bank made a further move later in the week, with its market leading 183 day notice account, not only being the highest paying notice account seen in over two years, but paying a higher rate than many 1 year fixed rate bonds currently on the market.
This week, we have also seen three market leading fixed rates launched, a 2 year fixed rate bond from Secure Trust Bank, a 5 year fixed rate bond from Paragon Bank and a 1 year fixed rate ISA from Virgin Money. Further proof that the competition in the fixed rate market is showing no sign of abating any time soon.
One of the most interesting aspects of the improvements made this week has been that existing customers have also benefited. In a rare move, Secure Trust Bank's 120 day notice account and 2 year fixed rate bond rate increase affected both new and existing account holders. In fact, this has been the second increase of the notice account, existing account holders having already seen their rate increase on 24th June 2015. This is particularly unusual when many savings providers are still cutting rates for existing account holders. July has seen the rates cut on 94 savings accounts already and we have not even reached the middle of the month.
Whereas most of the competition between challenger banks has taken place in the fixed rate bond and notice account categories, Paragon Bank has bucked this trend with the launch of a best buy easy access account, which sits just behind the current market leader, although unlike the account from BM Savings, it has no introductory bonus. This launch is one of the contributing factors to the increase in the Savings Champion Index (see below for details) for the third week in a row, resulting in the highest average we have seen since the beginning of December 2014.
In addition, the new easy access account from Paragon Bank has a maximum deposit of £75,000. A clear nod towards the change in the FSCS limit reduction taking place from 1st January 2016, it is the first provider to have done this so far. Other providers may also start to make changes and put plans in place in readiness for the change, which is certainly something we’ll keep an eye on.
From Friday 17 July - Paragon Bank will launch new versions of its 1 year fixed rate bond and 120 Day Notice Account paying higher rates than the previous versions. The 1 year fixed rate account will pay 2.07% gross/AER (the previous version was 1.85%) and can be opened online with a minimum of £1,000, up to a maximum of £100,000. No access to the funds is allowed during the term. The 120 Day Notice Account (Issue 4) will pay 1.96% gross/AER (the previous version was 1.60%) and can be opened online with a minimum of £500, up to a maximum of £100,000.
BM Savings has launched a new version of its Online Extra (Issue 18) paying 1.60% gross/AER. This replaced Issue 17, which was paying 1.50% gross/AER. The interest rate includes a 1.10% bonus for the first 12 months on balances above £1,000. Accounts can be opened and managed online only.
Charter Savings Bank has launched a new 18 Month Fixed Rate Bond, paying 2.15% gross/AER and also a new version of its 120 Day Notice account (Issue 4) paying 1.95% gross/AER. The 120 Day Notice account replaced the previous issue, which was paying 1.90% gross/AER.
The bond is the highest paying account for 18 months on the market at the moment, even comparing favourably to many 2 year bonds on the market, the rate being high enough to enter the top 10.
At the time of launch, the new version of the 120 day notice account was the clear market leader until Secure Trust Bank reacted to this challenge.
Secure Trust Bank increased the interest rate on its 120 Day Notice Account (Issue 13) from 1.90% gross/1.91% AER to 1.95% gross/1.96% AER, affecting both new and existing account holders.
This increase meant that the gross rate matched the market leading 120 notice account from Charter Savings Bank and sat joint top of the notice account table.
Secure Trust Bank also increased the rate on its 2 Year Fixed Rate Bond (Issue 11) from 2.21% to 2.33% gross/AER.
As a result, this account is now the market leading 2 year bond and sits at the top of the best buy table. This increase also affected existing customers, which is very unusual for a fixed rate account.
Then, later in the week, Secure Trust Bank launched a new 183 Day Notice account paying 2.05% gross/2.07% AER.
This is now the highest paying notice account to enter our best buy tables since June 2013, with a rate higher than many 1 year fixed rate bonds currently on the market.
Virgin Money has launched a new version of its 1 year fixed rate ISA paying a market leading rate of 1.71% tax free/AER. The previous version paid 1.65% tax free/AER.
Less than a week before, Virgin increased its 1 year fixed rate ISA from 1.61% to 1.65%, putting it in line with the market leading rates from Nationwide and Shawbrook Bank. With this further increase, Virgin is now the clear market leader.
Paragon Bank launched two new best buy accounts on Friday 10th July. The Limited Edition Easy Access Account (Issue 2) pays 1.46% gross/AER and the new version of its 5 Year Fixed Rate Account pays 3.06% gross/AER.
The new easy access account sits just behind the current market leading rate from BM Savings (1.50%), although the lack of an introductory bonus, unlike the market leader, may appeal to some savers.