It is just over a year since the Bank of England’s Monetary Policy Committee decided to cut the base rate to an all-time low of 0.25%, and it does not look like it will be moving anytime soon in the current economic climate.
Concerns about inflation did suggest the base rate might need revising sooner rather than later, as it reached a four-year high in June, but last month there was a surprise drop in the rate from 2.9% to 2.6%, and talk of rate rises has become more muted.
For savers, such low base rate figures are usually bad news as the savings providers see no reason to move rates higher on deposit accounts if the base rate stays static. Or at least that is how it used to be.
However, a quick look at the savings data over the past year shows that there have been some moves upwards that you might not have expected.
As we pointed out in our last newsletter, ‘easy access accounts on the up as the competition hots up’ best buy easy access savings accounts as well as fixed rate bonds across all terms have risen steadily since the beginning of the year, following a fall when the base rate was cut.
And this has continued.
This week, Bank of Cyprus UK has launched an easy access account paying 1.30% AER. This is the first time we’ve seen an easy access account pay this rate since the base rate was cut twelve months ago. Click here for more information and to apply for an account
So, what is going on? The short answer is the Challenger Banks are shaking up the savings industry to such an extent that, provided you are not wedded to a high street bank for some other reason – and why should you be? – you can get a much better deal by choosing a bank you may not have heard of before.
It also goes to show that the correlation between the Bank of England base rate and the savings rates available has largely been broken, providing you are happy to shop around.
Bank of Cyprus UK is a wholly owned subsidiary of the Bank of Cyprus Group and is a UK operation which is part of the Financial Services Compensation Scheme (FSCS). Therefore, your money is just as safe up to the FSCS limits, as it is with a high street provider – but this rate is streets ahead. The average easy access account on the high street is just 0.5% AER with some accounts paying as little as 0.01% AER.
If you can tie your money up for a period of time into a fixed-rate bond, the interest you can receive is even better.
The top one-year bond is with Atom Bank at 1.85% and fixed rates rise to as much as 2.5% for a five-year bond with Vanquis Bank and PCF Bank. See our fixed rate bond best buys for more information
But no matter how long you can tie your money up for, if you have not looked at what is available in the savings market since August last year, the chances are you could be getting a much better rate. So now is the time to act.
Never miss out on the best savings rate again by signing up to our Rate Tracker alerts, which will let you know when a better rate is available for you. Let us do the hard work for you.