The latest rate moves in the savings world.
Charter Savings Bank has entered the savings market with the launch of a range of variable and fixed rate savings accounts. The new challenger bank is UK based, with its head office in Wolverhampton. The provider has its own Financial Services Compensation Scheme (FSCS) licence, so deposits with the bank will be covered up to £85,000 per person. For more information on FSCS licences, check out our guide here.
New faces to the savings market are always a welcome sight, particularly if they can encourage more competition by challenging the current best buys. The easy access account sits just below the top 5 best buys on the market at the moment paying 1.25% gross/AER. The notice account is the most impressive of the new deals, as it matches the rate of the market leading account from Shawbrook Bank paying 1.75% gross/AER, although it has a shorter notice period requirement. The one year bond is also competitive at 1.80% gross/AER, sitting next in line after the Punjab National Bank (2%). The longer term bonds, from 2 to 5 years, are less competitive, with higher paying alternative options for each of the terms.
HSBC bucked the trend for a high street provider and introduced a compelling ISA offering for the ISA season, albeit an exclusive cash offer only for its Advance Current Account holders. Advance customers who pay in at least £25 per month or a lump sum of £300 into their Loyalty Cash ISA (1.49% tax free/1.50% AER) will receive an extra £10 a month for 12 months, on top of the interest they receive on the ISA. To be eligible for the current account, you must pay in at least £1,750 each month.
This is a fantastic deal for those who already have an Advance current account, with the cash incentive plus interest leading to a significant overall return over the year. This type of incentive is bound to be attractive to those who are looking to maximise their overall return and who may be prepared to switch their current account in order to qualify. For these savers, the offer is attractive, but there are alternatives out there. For example, another option could be to switch to a Halifax Reward Current Account and receive £125 for switching plus £5 for each month that you pay in at least £750; a total of £185 for the year. You could then open an easy access ISA with the Post Office at 1.50% to receive the same level of interest on the ISA as the HSBC Loyalty Cash ISA is paying. So the offer is possibly not as good as it first appears for those prepared to switch current account to take advantage. Of course it is also important to check the suitability of both current accounts before taking the plunge.
Meanwhile as we approach the end of the tax year, we have seen some other providers start to release new competitive ISAs to attract new customers.
Santander has launched a new range of cash ISAs, replacing its existing ISA range with new versions at improved rates. The 2 year fixed rate ISA exclusive to 123 Account or Santander Select customers is paying 2% (the previous version was 1.70%) and the 2 year fixed rate ISA available to everyone is paying 1.50% (the previous version was 1.40%). The variable rate easy access ISAs are paying 1.50% for 123 and Santander Select customers (increased from 1.30%) whilst new to Santander customers will continue to be offered 1%.
Santander has often been seen as a gauge as to how the ISA season will play out as they have been at the forefront of the ISA action previously. Whilst it is encouraging to see an improvement to its ISA offerings, it is not a complete surprise to see that Santander has reserved its best deals for existing customers or those happy to open a current account or credit card with them. The 2 year fixed rate ISA is one of the top rates available on the market, whereas the variable rate ISA sits in line with the top easy access ISAs on the market. There is less encouraging news for those new to Santander, with the rates lagging some way behind the competition. That said, it is encouraging to see improvements and let’s hope that others follow Santander’s lead to push ISA rates back in the right direction.
Shawbrook Bank launched its first publicly available cash ISAs recently and then in the same week improved the rates on offer. The 120 day notice ISA is now paying 1.55% (the previous version was 1.45%) and the 2 year fixed rate ISA is paying 1.95% (the previous version was 1.75%).
It's great to see a provider branch out into areas of the savings market where they previously haven’t ventured, better still a challenger bank known for offering competitive accounts. Shawbrook is well known for offering competitive notice accounts and fixed rate bonds so it is no surprise to see cash ISAs that mirror these types of accounts. The notice ISA is now in the top 5 for variable rate ISAs, although it still lags behind Hinckley & Rugby Building Society (1.60% with 120 days’ notice). The 2 year fixed rate ISA matches the Post Office, which at the moment is the highest paying 2 year fixed rate ISA on the market that is widely available.
State Bank of India has launched a 1000 Day fixed rate ISA paying 2.30% and a 5 Year Fixed Rate ISA paying 2.50%. These both now feature in our Fixed Rate ISA Best Buy Table. The 1000 day fixed rate ISA is paying a significantly higher rate than the top 3 year fixed rate ISA from the Post Office (2.10%). The 5 year fixed rate ISA is beaten only by United Trust Bank (2.75%), although the latter only accepts transfers in, with no new ISA money allowed.
Yorkshire Bank and Clydesdale Bank have launched a new Cash ISA – Fixed Rate Bond Issue 27, paying 2.10% until 28th April 2017.
Another good rate for a fixed rate ISA and although the term is slightly longer than 2 years, the rate is much higher than the best of the 2 year deals (Post Office 1.95%). The catch is that the ISA can only be opened in the banks’ branches, so not everyone will be able to take advantage.
Hopefully as we get closer to the end of the tax year, which is traditionally the time that many savers pay into an ISA, we will see more providers improving the ISAs on offer and pushing the rates up even higher.
Finally, at a time when many providers are still withdrawing accounts and replacing them with lower paying versions, it is good to see Shawbrook Bank going against the trend. The provider launched a new version of its 120 Day Notice Account, paying 1.75% (the previous issue paid 1.60%) and 95 Day Notice account paying 1.55% (the previous version was 1.45%), making both accounts best buys. The provider also launched a new 2 Year Fixed Rate Bond paying 2.20%, the previous version was 2.05%.
Although 120 day notice account subsequently had its thunder stolen by the new 95 day notice account from Charter Savings Bank mentioned above, it is still a positive move. It is fairly typical of the savings market at the moment to see challenger banks, like Shawbrook and now Charter Savings Bank, providing the only real competition. Is it time to review your savings and move away from the high street providers?