Save yourself for top deal
SAVERS will be tempted by a new fixed-rate bond paying a marketleading 2 per cent a year but they may also be wary of locking into a deal as rising inflation could soon push up savings rates across the board.
Investment platform AJ Bell has just launched a five-year fixed-rate bond on its Youinvest platform paying 2 per cent a year on a minimum deposit of £1,000. This is only matched by one other provider – Recognise Bank – while JN Bank pays 1.95 per cent.
These deals show how savings rates are already starting to rise in anticipation of a Bank of England base rate increase, as the best fiveyear fixed rate in March was just 1.5 per cent, and most providers paid much less.
AJ Bell’s savings hub lets savers manage their cash in one place, and open as many accounts as they like from a range of UK banks, a concept similar to Hargreaves Lansdown Active Savings and Raisin UK.
AJ Bell head of personal finance Laura Suter said millions have saved money during lockdown only to leave it sitting in a bank account earning next to nothing: “It only takes a few minutes to switch it to a better paying account.”
Now is a great time to shop around for a better deal.
“There has been a savings rates war in the market, driving interest rates up, so you could get much better rates,” Suter added.
A saver with £5,000 would get just 50p interest a year if they leave it in their current account earning 0.01 per cent, but moving it to a best-buy 2 per cent rate would give them £100, Suter said.
Money-Comms personal finance expert Andrew Hagger said savers should be wary of locking their money away for five years today, even though they can get much higher returns than just a few months ago.
Savings rates could climb higher if the Bank of England tries to curb inflation by increasing base rates, as many now anticipate.
“Today’s long-term fixed rates may suddenly become uncompetitive after a few months,” Hagger said.
He suggested fixing for a shorter period. “Gatehouse Bank pays 1.60 per cent fixed for 18 months. If you want an even shorter term, Zopa pays 1.36 per cent fixed for one year, and Aldermore pays 1.35 per cent.”
These banks are all covered by the Financial Services Compensation Scheme, so up to £85,000 is protected by the Government.
The Family Building Society pays today’s leading easy access rate of 0.65 per cent, followed by Aldermore, Leeds Building Society and Marcus by Goldman Sachs at 0.60 per cent.
Hargreaves Lansdown personal finance analyst Sarah Coles said a base rate hike would push up savings rates but cautioned: “We cannot be sure when the base rate rise will hit, or how the banks will react.”
Rather than waiting for a rise, Coles suggested shopping around to improve your returns today.
“If you are getting 0.01 per cent from your high street bank, you can get 60 times that return on easy access today,” she said.