This week's Rates Rundown

10th November 2016

Looking back at changes in the savings market over the last few weeks, many banks and building societies still seem to still be trying to escape from the best buy tables rather than enter them, which is obviously not great news for thosewho are looking to get the most out of their savings.

Also, rate cuts affecting existing accounts continue to hit savers, following the reduction of the base rate in August, with one of the most high-profile changes happening last week, when Santander halved the interest rate on its popular 123 Current Account. Luckily for savers, there are alternatives out there, for example Nationwide’s FlexDirect Current Account, which pays 5% AER.
 
Despite this, we have seen a select bunch of providers going against the general trend and actively compete in the best buys, particularly amongst fixed rate accounts. Secure Trust Bank and Charter Savings Bank have both released new fixed rate bonds that went straight into our best buy tables. We have also seen Tesco Bank improve its 1 year fixed rate cash ISA and is now sitting at the top of the table.
 
Finally, for First Time Buyers looking for a Help to Buy ISA, Yorkshire Building Society has entered the market with a new competitive account.
 
Current accounts continue to offer savers some of the very best interest rates available and so, it was no surprise that Santander cut the interest rate on its popular 123 Current Account. This means that those with balances between £3,000 and £20,000 saw their rate halve from 3% to 1.50% AER.
 
While the size of the cut will come as a shock to holders of the account, the revised rate remains competitive compared to standard easy access savings accounts and there is a cashback facility. But you should also take into account the £5 monthly fee.

However, for those looking for an alternative, there are other High Interest Current Accounts available, with rates far ahead of the best on offer from standard savings accounts. 

Secure Trust Bank has launched a new 5 year fixed rate bond paying 2.01% gross/AER. Accounts can be opened online with a minimum of £1,000 and it is available to personal customers, businesses, charities and trusts. Interest must be paid to a separate account; it cannot be added to the bond.
 
Following this provider’s return to the fixed rate market earlier in October with a new best buy 2 year fixed rate bond, having been absent since July this year, this market leading bond is even better news for those looking for a longer term fixed rate. Having said that you should be aware of the fact that interest cannot be added to the bond, so you cannot benefit from compounded interest.
 
Charter Savings Bank has released a new 2 year fixed rate bond paying 1.51% gross/AER. Accounts can be opened online with a minimum of £1,000 and funds cannot be accessed within the term. There is the option to have interest paid monthly, if you prefer a regular income from your savings.
 
This provider withdrew from the 2 year fixed rate bond market at the beginning of August this year, leaving just a 1 year and 18 month bond available, so it is good to see the provider giving more options to suit different circumstances. Whilst this rate is not the highest on the market, with Atom Bank paying 1.55% gross/AER, it is the next best. This could certainly be a viable alternative for those who prefer not to apply for an account through a provider’s app, as is the case with Atom Bank.
 
Tesco Bank has launched a new version of its 1 year fixed rate ISA paying 1.11% tax free/AER (the previous version was paying 1.00%). Accounts can be opened online and transfers in of previous ISAs are allowed. Funds can be accessed by closing the account, subject to a charge of 90 days’ interest on the balance.
 
It is great to see a new cash ISA launched that beats the competition, particularly at a time of the year not known for competitive ISAs, with better options normally appearing in and around the start of the new tax year. This account is now the top rate that is widely available, apart from the 1.35% tax free/AER that is available from Al Rayan Bank and is Sharia compliant, so may not suit every saver. For more information on Sharia Compliant Accounts, call us on 0800 321 3581.
 
Yorkshire Building Society has entered the Help to Buy ISA market with a new account paying 2.00% tax free/AER. Accounts can be opened online, in branch or by post with a minimum of £10. As with other Help to Buy ISAs, up to £1,200 can be deposited in the first month and then up to £200 per calendar month after that.
 
The interest rate is competitive and whilst better rates are available from both Barclays and Buckinghamshire Building Society, it is in line with the next best rates. It is good to see a larger provider enter the market, particularly as there will be a number of first time buyers looking at the mortgages on offer and preferring to keep their savings with the same provider.
 
For more information on Help to Buy ISAs, take a look at our free factsheet and refer to our Help to Buy ISA Best Buy Table for the top rates on the market at the moment.
 
Savers are having a tough time following the base rate reduction in August, with the double whammy of rate cuts affecting existing accounts and the lowering of interest rates on offer for those looking to open an alternative. Whilst we have seen a small group of providers increasing the rates on offer, we won’t see a consistent upturn in rates on offer until more providers join the race and bring more competition into the market. In fact, the early front runners are more likely to be sucked back into the pack if they are left exposed on their own, as they struggle to cope with the demand.

If you need any help with your savings or would like to discuss further options, please call us on 0800 321 3581, we'd love to hear from you.
 

 

 

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