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 per cent for one year.
Better rates: Savers can finally enjoy some better news as newer banks push up rates on fixed-rate bonds
Building societies have joined in, with rates in the High Street up at 1.05 per cent from Principality BS and 1 per cent 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 per cent 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 per cent and is expected to climb. The Bank of England forecasts it will peak at 2.8 per cent in the first half of next year before falling back to 2.4 per cent in three years’ time.
It means savers are set to lose out if rates stay at these low levels.
Attention grabbing: With a lack of branches, the best way newer banks can grab attention is by paying the highest rates
If you earn 1 per cent and inflation is running at 1.8 per cent, this means that your savings pot loses spending power at a rate of 0.8 per cent a year.
With inflation at 2.8 per cent, you lose 1.8 per cent — 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 per cent fixed for two years and Halifax 0.7 per cent, while HSBC and NatWest pay 0.5 per cent 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 per cent 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 per cent online. Other good deals include United Trust Bank at 1.4 per cent and OakNorth Bank’s 1.62 per cent.
In the High Street, Virgin and Principality BS pay 1.05 per cent.
And you get little extra if you tie up your money for two years.
Atom pays 2.1 per cent, OakNorth 1.66 per cent, Mast-haven Bank 1.58 per cent and Family BS 1.57 per cent.
The best you can do in the High Street is 1.2 per cent from Skipton or 1.15 per cent 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.
This article was sourced from http://newsjadensmith.com