As we approach the close of the year, we thought we'd take the opportunity to look at what's happened to the savings market in 2015, and by all accounts, it's been a busy one…
From new brands entering the savings market to initiatives designed to encourage people to save, 2015 has seen a lot of activity in the sector. Granted, not all of it has been positive (as Rachel Springall, finance expert at Moneyfacts, points out: "This year's savings market continued to feel the effects of the Funding for Lending Scheme, which ultimately meant that providers lacked the appetite to compete for savers' cash."), but it certainly hasn't all been doom and gloom.
Check out the table below to see what's happened in the last 12 months in more detail. As you can see, there've been a couple of disappointments, but there's also a lot to celebrate, with the average easy access account, three-year and five-year bond rates all showing signs of improvement.
There have been a few brighter glimmers of hope in the last 12 months, too, the highlight of which has got to be the Pensioner Bonds. Officially known as NS&I's 65+ Guaranteed Growth Bonds, these one and three-year deals paid rates of 2.80% and 4.00% respectively, and can easily be crowned the winners of the year's best rate.
But what about for younger savers? Here, the winners came in the form of challenger banks, which have dominated the best buy tables throughout the year. Granted, rates may not have been quite as good as those offered by the lucrative Pensioner Bond, but challengers' market-leading status is clear – and they certainly beat anything that high street banks have been able to offer.
"A warm welcome was extended to these newcomers as they increased competition in the market and gave savers eye-catching rates," said Rachel. "Of particular note was the entrance of RCI Bank UK and its easy access account, which has held a market-leading position since the summer by paying a highly attractive rate of 1.65% yearly. The bar was also raised by challengers in the fixed rate market, with the average top-five deals jumping from 1.78% yearly in January to 2.10% today."
These lesser-known banks have certainly made an impact on the market, and the industry is hopeful that even better rates could be in store following news of the US Federal Reserve raising interest rates. Expectations that the Bank of England will soon follow suit are high, but it may not be an instantaneous reaction, as Rachel added:
"We just don't know exactly when it will happen and by how much it will increase. Even when it does go up, there's the possibility that it won't greatly influence savings rates – the link between the two has been severed for many years, so the full force of a rate rise may not be passed onto savers. Nevertheless, it could still result in some positive changes in the savings market."
If you're after a new account and want to benefit from any positive impact that a base rate rise could have, it may be worth thinking about base rate tracker bonds, as these deals guarantee to pay a certain rate of interest above base rate – a feature that will be ideal when rates rise. It's also worth remembering that, while long-term fixed deals tend to offer the best rates, they tend to come with access restrictions, so if you're thinking of taking the plunge it'll be worth checking whether or not the account has withdrawal flexibility, in case you want to move to a better deal at a later date.
But just what else is in store for the savings market? Well, although we can't tell what kind of rates could be on the cards, there's one definite improvement that'll be with us in just a few months' time: the launch of the personal savings allowance.
"Looking towards 2016, savers earning little interest or those in possession of a modest savings pot will get a massive boost from 6 April," said Rachel. "Interest of up to £1,000 will become tax-free for basic rate taxpayers (or £500 for higher rate taxpayers), and while this won't improve interest rates, it's probably the best news savers have heard all year."
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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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