Is savers’ patience about to pay off?
TRICIA PHILLIPS reveals how the flip side of inflation could be good news for some
SAVERS have been hammered for years – but now rising inflation, while hitting our pockets hard, is helping push up rates.
We’re not talking mega amounts – and banks have been slow to put their hands in their pockets – but compared to the insulting rates we’ve had for way too long, things are picking up.
Now some banks are offering an extra boost, namely cashback, to encourage people to deposit with them.
Sarah Coles, senior personal finance analyst at investment firm Hargreaves Lansdown, says: “Cashback deals can boost savings rates to beat the best on the market.
“Now you can earn extra cash by switching your money – and when you add it to the effective interest, it knocks its closest competitors out of the park.” Chase Bank was already top of the table in the easy access market, but competitors began closing in. And given you have to open a current account with Chase to get the 1.5% rate, it was starting to look like a step too far. But now Chase is offering a £20 bonus when you open the account, taking the effective interest rate on a £10,000 deposit to 1.7% – way out in front of everyone else. What’s more, if you recommend a friend who signs up you both get another £20 each. You just need to generate a code in the rewards section of the app and share it. Takers will get a £20
bonus too.
You can recommend up to 20 friends, so you could technically make £400.
Hargreaves Lansdown’s Active Savings is offering cashback too if you switch. It isn’t a bank account in itself, but a platform, where savings accounts from different banks sit.
It makes it easy to switch your money between them.
If you put £10,000 into Active Savings this month, you’ll earn £20 – and the more you switch, the more cashback is available.
The most competitive 18-month fixed rate account on the platform now is Charter Savings Bank’s 2.45%. Save £10,000 and you get £20 cashback, taking the effective rate to 2.65% – well ahead of the next best, Al Rayan bank’s 2.5%.
It’s not the only good news for savers.
Sarah adds: “Rates are looking much more positive as smaller and more competitive banks pass on Bank of England rises.”
When those rates started rising,
banks dragged their heels in passing them on, but competition is really picking up.
When Chase offered 1.5% on its easy access in March, it was way ahead, but the gap is closing rapidly. Cynergy Bank is offering 1.32%, and others are catching up.
In the fixed rate market, rises have been more striking. In November the best one year was 1.36%. Now you can get 2.4% from Al Rayan.
The best two-year fix was 1.61%, now Al Rayan offers 2.8%.
And because we’re not saving at quite the rate we were at the height of the pandemic, rates could rise even further.