Savings Rate Rundown
Nationwide has launched new versions of its Flexclusive ISA paying 1.60% (the previous version was paying 1.50%) and its Instant ISA Saver paying 1.40% (the previous version was paying 1.25%). In addition, the interest rates on the previous versions of both accounts have also been increased to bring them in line with the new versions, benefitting existing account holders. Both accounts can be opened with £1 and have no withdrawal restrictions. The Flexclusive ISA is only available to customers who hold one of Nationwide’s ‘flex’ current accounts.
Also released today are new versions of the provider’s fixed rate ISAs. The 1 Year Fixed Rate ISA is paying 1.60% (the previous version was paying 1.45%), the 2 Year Fixed Rate ISA is 1.80% (the previous version was 1.65%) and the 3 Year Fixed Rate ISA is 2% (the previous version was 1.80%). Each account can be opened with £1 and you can access the funds on closure or full transfer out only, subject to 90 days loss of interest for the 1 year ISA, 180 days loss of interest for the 2 year ISA and 270 days loss of interest for the 3 year ISA.
Just when we thought this disappointing ISA was all over, with competitive ISAs being withdrawn from the market completely or replaced with lower paying versions, Nationwide has made a further move in the ISA market, having earlier released its Regular Saver ISA paying 2.01% AER. The new easy access ISA rates are competitive, with the Flexclusive ISA paying the top rate on the market at the moment for an easy access ISA, although it is only available to those holding a current account with the provider. The fixed rate ISAs are also competitive, with the 1 and 3 year ISAs both appearing in the top five for their terms and the 2 year ISA sitting just outside the top five. Nationwide is one of the few high street providers that have made significant improvements to its ISA range in this ISA season, although it is reserving the best of the bunch for its current account customers. Even more surprising and good news for Nationwide savers is the increase in interest rates for those holding Issue 8 and Issue 2 (the previous versions) of these easy access ISAs, coming at a time when many providers are ruthlessly cutting the rates for existing account holders.
Nottingham Building Society launched an eSaver Plus Issue 7 paying 1.45% gross/AER. The rate includes a 0.95% introductory bonus, which will be paid on 30/06/2016, provided the account remains open with a minimum balance of £5,000. The bonus will not be paid if the account balance falls below £5,000. Accounts can be opened online with a minimum of £5,000 and there are no withdrawal restrictions.
This account is the highest paying easy access account to appear on our best buy table since early December 2014, however whilst the account at first glance appears straightforward, there are unusual conditions attached to the introductory bonus. You may think this is how a bonus account should work but easy access bonus accounts tend to pay the bonus for a set period and are not generally based on strict terms and conditions. On this account, if the balance falls below £5,000 or the account is closed before the end of the bonus period, then the bonus will not be paid. Providers sometimes attach restrictions like this to higher paying easy access accounts, which limit their appeal. These accounts can still be used if withdrawals are planned carefully and the terms and conditions adhered to, particularly if sufficient emergency funds are held in less restrictive alternatives.
Charter Savings Bank recently made changes to its notice account range, launching new versions of its 120 day and 95 day accounts. The 120 Day Notice – Issue 2 is paying 1.95% (the previous version was paying 1.85%) and the 95 Day Notice – Issue 2 is paying 1.80% (the previous version, which was available earlier in the month, was paying 1.75%).
As mentioned in our challenger bank article, Charter Savings Bank, one of the new challenger banks, has dominated the notice account best buy table in recent times, sweeping away the competition and currently provides three of the top five accounts. It is interesting to note that the 120 day notice account is the highest paying notice account on the market since August 2013 and it comes at a time when many providers seem to be doing either just enough to appear in the best buy tables or simply avoiding them altogether. It is great to see a provider that is not just content to do enough to top the table, but to push its rates up even further.
Paragon Bank recently made improvements to its 3 and 5 year fixed rate bonds for new accounts opened. The 3 year fixed rate bond is paying 2.50% (the previous version was paying 2.40%) and the 5 year fixed rate bond is paying 3% (the previous version was paying 2.91%).
The provider has this week followed these changes with the launch of a new version of its 2 year fixed rate bond paying 2.21% (the previous version was paying 2%). The account moved into second place in the table, sitting next in line after Punjab National Bank (2.30%) and just beating the rate from Charter Savings Bank (2.20%).
In the current savings market, there is little upward movement amongst fixed rate bonds and challenger banks like Paragon Bank are almost solely responsible for any improvements made. Both the 3 and 5 year bonds were already in the top five for the respective terms and this change has pushed them even further up the tables. The 3 year account is beaten only by the 65+ Guaranteed Growth Bond from NS&I (4%) and the Punjab National Bank (2.55%). The 5 year bond joins Close Brothers and United Bank Ltd at the top of the table, but has the lowest opening balance requirement of the three bonds. The 2 year bond moved into second place in the table, sitting next in line after Punjab National Bank (2.30%) and just beating the rate from Charter Savings Bank (2.20%). Challenger banks are dominating the best buy tables at the moment and the large high street brands are nowhere to be seen.
Paragon Bank has also entered our Easy Access Best Buy Table with the launch of a new Limited Edition Easy Access account. The account is paying 1.35% and is the top paying ‘clean’ (no withdrawal restrictions or introductory bonus) account on the market that is available to everyone.
This is the first time that this provider has launched a competitive easy access account, having mainly appeared in our fixed rate bond and notice account best buy tables. It is great to see this provider branching out into other categories, providing much needed competition in an often neglected part of the savings market.
Tesco Bank has launched a new version of its Internet Saver, the previous version paid 0.75% with no bonus and the new version is paying 1.35%, including a 0.60% introductory bonus for the first 12 months.
This easy access offering has gone from uncompetitive to best buy in one fell swoop. The account is straightforward, although the rate does include an introductory bonus, so those who have opened the account may need to shop around for a better deal after the initial 12 months. Whilst this account is not a table topper, the rate is good enough to appear in the top five and this may be judged enough by the provider to get the balances in that it needs.
Whilst we have seen plenty of positive moves from challenger banks, such as Charter Savings Bank and Paragon Bank, the established high street providers have largely disappeared from the best buy tables and in some cases are actually lowering the rates on offer. For example, Lloyds Bank and Halifax, both part of Lloyds Banking Group, have recently made a number of changes to their fixed rate bond ranges.
Lloyds Bank has lowered the rates on its 1, 2 and 3 year fixed rate bonds for new accounts opened and now pays between 1.05% for 1 year to 1.40% for 3 years on balances above £50,000.
Halifax has withdrawn its full range of Fixed Online Savers, as well as its 2 and 5 year Fixed Saver accounts. The provider now has just a 1 year Fixed Saver paying 1.05% (the previous version was 1.20%) and a 3 year Fixed Saver paying 1.40% (the previous version was 1.60%) available to open.
Considering that these providers are two of the largest, most well-known providers in the UK, these changes have given savers both less choice of terms available and made uncompetitive rates even worse. This is a clear example of high street providers moving themselves further away from the best buy tables, relying on their name and size alone to pull in the balances that they need.