Rates finally start to rise on top bonds

SAVERS can finally enjoy some better news as newer banks push up rates on fixed-rate bonds.

The increases are small, but the rates are higher than at any time in the past ten months.

Atom Bank has raised its deals and now pays 2 pc for one year.

Building societies have joined in, with rates in the High Street up at 1.05 pc from Principality BS and 1 pc from Yorkshire BS.

And today’s Budget may reveal more information on the National Savings & Investments three-year bond, expected next month at a rate of 2.2 pc on maximum savings of £3,000.

The big banks, however, refuse to budge on their poor rates.

With a lack of branches, the best way newer banks can grab attention is by paying the highest rates.

And, unlike the big banks, they are looking to attract money from savers to fund their lending and grow.

The rises come at a time when some City experts predict rates will stay at rock-bottom levels for another two years.

Charlotte Nelson, from data analysts Moneyfacts, says: ‘This may be all be very short-lived.

‘ The absence of larger providers joining in with the rate rises means it is unlikely the whole market will improve any time soon. Savers looking for a fixed rate would be wise to act sooner rather than later.’

Meanwhile, inflation — the rise in the cost of living — is running at 1.8 pc and is expected to climb. The Bank of England forecasts it will peak at 2.8 pc in the first half of next year before falling back to 2.4 pc in three years’ time.

It means savers are set to lose out if rates stay at these low levels.

If you earn 1 pc and inflation is running at 1.8 pc, this means that your savings pot loses spending power at a rate of 0.8 pc a year.

With inflation at 2.8 pc, you lose 1.8 pc — turning the value of £ 1,000 into £982 over 12 months.

If you have a fixed-rate bond with a big bank coming to the end of its term, don’t take the new rate you’re offered — the banks have little appetite for attracting savers.

Instead, switch to a new bank or building society, where you can more than double your rate.

For example, Lloyds Bank pays a lousy 0.55 pc fixed for two years and Halifax 0.7 pc, while HSBC and NatWest pay 0.5 pc for one year. All four deals are worse than what you can earn in any easy-access account (see the savings table above). The 2 pc Atom Bank one-year fixed-rate deal is available only through an app downloaded onto your smartphone or tablet. Secure Trust Bank offers 1.61 pc online. Other good deals include United Trust Bank at 1.4 pc and OakNorth Bank’s 1.62 pc. In the High Street, Virgin and Principality BS pay 1.05 pc. And you get little extra if you tie up your money for two years. Atom pays 2.1 pc, OakNorth 1.66 pc, Masthaven Bank 1.58 pc and Family BS 1.57 pc. The best you can do in the High Street is 1.2 pc from Skipton or 1.15 pc from Virgin and Yorkshire BS. If you’re considering the new NS&I bond, it’s likely you won’t be able to access your interest until the end of the third year. Instead, it will be added on to your bond every 12 months.