In most instances fixed rate savings pay the highest rates on the market, but many savers prefer to have at least part of their money in a variable rate account where they can access their money should they need to. Many providers offer a range of accounts, but savers looking for top rates need to ensure they have read the terms and conditions fully, as more best buy accounts include a large bonus in the rate or apply other restrictions such as limits on the number of withdrawals that can be made.
Research from Investec Private Bank, shows that in the last five years the average bonus size has trebled with most of the increase coming in the last few years as the banking crisis took hold. In October 2005, 11.07% of accounts included a bonus with the average standing at 0.61%. Five years later and the average bonus is 1.82% and is included on more than a fifth of accounts.
With savings rates so low the temporary bonus is, in many instances, the biggest part of the rate. If savers don't remember to move their money when the bonus period ends, they could end up suffering a large drop in the interest rate they receive. Unlike accounts with rate guarantees, there is currently no requirement by the provider to remind you that a bonus period has come to an end, so the onus remains on the saver. Bonuses can provide a welcome boost to the interest you receive, but the benefit could be wiped out if you forget to move away at the end of the term.
Market leading ISA
Savers looking to invest both this and previous years ISA allowances are being offered a market leading rate of 4.60% from Leeds Building Society on its 5 Year Fixed Rate ISA. Savers can invest as little as £1 into the ISA, which matures on 28 February 2015. Unlike many other five year ISAs, savers can withdraw up to 25% of the initial investment penalty free, with further withdrawals permitted subject to a loss of 180 days' interest.
Coventry storms to the top of the charts
Coventry Building Society has gone to the top of the best buys paying 3.30%, including a 1.30% bonus for one year, on its relaunched 1st Class Postal account. Savers can invest between £1,000 and £250,000 into the account, with a monthly interest option available for those looking for a regular income. If savers wish to access their money, they must make a minimum withdrawal of £1,000. Up to four penalty free withdrawals can be made each year, with subsequent withdrawals losing 50 days' interest.
New bonds from Barclay's
Barclay's Bank has just launched a new range of fixed rate bonds paying up to 2.25% on its one year bond, up to 3.40% on its three year bond and up to 4.90% on its five year bond. Savers can invest between £500 and £1m into the bonds, which are operated in branch. Once opened, further additions and access to funds is not available during the term.
Compare cash ISAs and fixed rate bonds"
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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