Easy access accounts are always popular and before the introduction of the Funding for Lending Scheme (FLS), around 60% of all interest-bearing deposits were available on easy access, with the remainder held in notice and fixed term accounts. But over the years, money has poured out of the latter and even more has gone into easy access accounts.
Today, the amount in easy access (£724bn), accounts for 81% of the market. A huge increase, no doubt as savers have been holding out for better rates, possibly from the elusive increase in the Bank of England base rate.
Do savers really need to have access to all their funds?
With a little bit of forward planning they could add valuable interest to their pocket.
If just half of that money is not needed immediately and was instead placed into a notice account, savers could be earning over £4.6bn in extra interest – and still have access to their funds with just four months’ notice.
However, if this money was instead deposited in the Secure Trust Bank 120 Day Notice Account paying, 1.75% AER, you could earn £875 - and still have access to your funds within four months.
Surely it’s worth moving funds that aren’t needed immediately.
We all know that most people leave funds languishing with their high street provider, as they assume that moving it won’t earn much more interest.
And as the high street providers don’t offer notice accounts, this could explain why many don’t know about or use these useful middle-ground accounts.
Of course, they could also earn more by simply switching to one of the best-paying easy access accounts – but if they don’t need the access, they could squeeze out even more.
We recommend considering a balanced savings portfolio. It’s important to keep enough in easy access but with money that hasn’t or isn’t likely to be used, rather than having to tie the rest up for a fixed term, savers can also utilise the lesser known and often underused middle ground. Notice accounts.
Currently best buy notice accounts are at their highest level for two and a half years – and the choice of terms is ever wider.
The most common and best value accounts range from 60 to 120 days' notice, although the very best rate is for 180 days, paying 1.77% gross/1.78% AER.
Savers need to be aware of notice accounts in order to take advantage of them and even those who are familiar with the concept may not be familiar with the providers, as the most competitive accounts tend to be provided by lesser-known names such as Secure Trust Bank, OakNorth Bank and Charter Savings Bank.
As long as the provider is protected by the FSCS, then why not take a well-informed leap of faith with an lesser-known provider, as it is definitely the challenger banks that dominate this market.
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