Savings rates hit two year high!
After years of plummeting savings rates, recent weeks have seen some really positive signs in the market. Best buy 1 year fixed rates bonds hit their highest level since 1 August 2013 and notice accounts have quickly followed suit paying rates not seen since June 2013. It’s no surprise that the rates on notice accounts and fixed rate bonds are on the up, as these are the products that are favoured by the Challenger Banks, the providers that are bringing much needed competition and life back into the savings landscape.
But it’s not just the Challenger Banks. In an unusual move, a high street bank is also getting in on the act, with Halifax improving the rates on some of its fixed rate ISAs with its 2 year fixed rate ISA joining Virgin Money in paying the market leading rate (paying 2% AER). In addition BM Savings (part of the Halifax group) replaced its already market leading easy access account paying 1.50% gross/AER with one paying 1.60% gross/AER.
Halifax had taken a back seat from the majority of the best buy tables, with only its Children’s savings accounts paying top rates. So this latest move is quite poignant and could point towards a round of recovery for beleaguered savers. We hope we’re not speaking too soon!
In other news Secure Trust Bank has raised the rate for some of its existing notice account customers, the second time in recent weeks. Secure Trust Bank bucked the trend and increased rates for both its new and existing customers. The same cannot be said for Halifax customers sadly, but perhaps that is expecting too much!
With competition heating up and more new providers expected to hit the savings market soon, we can but hope this current trend will continue. Although we still need to wait for the eventual rise in the Bank of England base rate, the lack of competition also had a dramatic effect on savings rates and the current boost has been a long time coming for savers.
Added to that, the recent announcement that inflation is back to 0%, offers savers some additional relief, as every penny earned is not being eroded by the effects of inflation. There are now over 1,000 accounts available to both basic and higher rate taxpayers, giving a real return (after tax and inflation). This is in stark contrast to this time last year when 121 accounts beat basic rate tax and inflation and just 67 accounts beat higher rate tax and inflation. That said, low inflation generally means less pressure on the Bank of England to raise interest rates, so what you gain with one hand, you potentially lose with the other.