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Just a few weeks ago, savings rates were falling and it was impossible to find a fixed-rate bond paying anywhere near five percent. Suddenly, they’re everywhere and getting more generous all the time.
April’s consumer price index figure changed everything. It showed that inflation is far from beaten, slipping only slightly to 8.7 percent.
Markets believe this will force the Bank of England to ratchet up its interest rate increases, possibly lifting bank rate as high as 5.5 percent or six percent.
Today it stands 4.5 percent so there’s a long way to go before the BoE is done.
This has given banks and building societies the green light to launch new fixed-rate bonds paying interest rates we haven’t seen in 15 years.
Savings platform Raisin UK, which offers accounts from a range of different banks, is leading the field with its five-year fixed-rate from digital challenger Tandem Bank.
This pays 5.35 percent on balances between £1,000 and £85,000.
A saver who deposits £10,000 would get £535 a year, which would rise to a total of around £12,977 over the five-year term.
Better still, they will be getting that 5.35 percent rate all the way to 2028. That’s still below inflation today but should be comfortably ahead in the final two or three years of its term, when consumer prices should have retreated towards the BoE’s target of two percent.
Tandem is not alone in paying savers more than five percent a year. Shorter terms are available too.
According to the Moneyfacts website, United Trust Bank offers the next most competitive five-year fixed rate bond paying 5.15 percent a year.
It is followed by Hampshire Trust Bank paying five percent.
There is a wide choice of four-year fixed-rate bonds with OakNorth Bank paying 5.07 percent, Hampshire Trust paying 5.05 percent and RCI Bank UK paying five percent a year over that time.
Over three years, both OakNorth and Tandem pay 5.30 percent.
Raisin continues to offer the “unbeatable” one-year bond paying 5.25 percent that I highlighted last week.
Shawbrook pays 5.16 percent over one year with Charter Savings Bank paying 5.1 percent.
Inevitably, today’s best buy accounts are only available online, and the high street giants are nowhere to be seen.
Barclays, HSBC, Lloyds and NatWest rarely trouble the tables, preferring to plump up their profits instead of supporting savers. Although to be fair, NatWest does now offer a cash Isa paying 4.5 percent.
They sometimes offer competitive rates on monthly savings accounts, but only on limited contributions for a maximum of one year.
Savers who shop around are being amply rewarded for making an effort and trying out new names.
Provided the account comes under the remit of the Financial Services Compensation Scheme, which protects the first £85,000 of savings, there is no added risk, either.
Lucinda O’Brien, personal finance expert at Money.co.uk Savings, says that as well as checking out headline interest rates, consider the account’s accessibility, withdrawal terms, initial deposit and minimum balance.
“There’s no point earning an extra fiver on your savings if you can’t get at them when you need them.”
O’Brien highlights Yorkshire Building Society’s online rainy day account which has an interest rate of 3.85 percent.
“This can be opened with a minimum of £1 in branch or via the telephone. However, you can only withdraw money on two days a year based on the anniversary of the account opening.”
Elsewhere, Chip’s instant access account currently pays 3.82 percent on as little as £1, she said.
Today’s higher savings are something to celebrate even if they are lower than inflation. Don’t put up with your current bank if it refuses to join in the fun.
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