Savings News

Once again the changes to the charts this week have been minimal with just a few changes in the overall savings rates on offer. The first of these is Sainsbury's Bank pushing Paragon Bank into fourth place in the easy access no bonus comparison tables. Paragon, who made their entry straight into third place last week, have been overtaken by Sainsbury's Bank's Defined Access Saver – Issue 11 paying 1.47%. The top rate in this chart remains at 1.50% AER while the same rate continues to top the with bonus easy access chart. As with last week, the best rate in the savings charts remains in the long-term fixed rate chart, that offers savers an expected profit rate of 2.75% AER on a five-year bond. The medium-term fixed rate charts also remain highly competitive with savers able to obtain an expected profit rate of 2.55% AER on a three-year bond. Rates remain lower in the short-term fixed chart, where savers can still get an above-inflation expected profit rate of 2.32% AER on an 18-month bond.

The best easy access savings rates 

The best bonus-free easy access savings rates

• Virgin Money, Double Take E-Saver Issue 10 – 1.50% AER
• Virgin Money, Man Utd Double Take E-Saver Issue 5 – 1.50% AER
• Sainsbury's Bank, Defined Access Saver Issue 11 – 1.47% AER

Topping the bonus-free easy access chart once again this week is Virgin Money with a rate of 1.50% AER being offered on two of its saving products. For a minimum deposit of just £1 savers can get this rate on Double Take E-Saver Issue 10 and Man Utd Double Take E-Saver Issue 5. Both accounts can only be opened and managed online and allow unlimited additions, although withdrawals are restricted to two withdrawals per calendar year including closure. The Man Utd Double Take E-Saver has the added incentive of giving savers 10 entries into the prize draw for every month the account is open and one extra entry for every £50 held in the account.

Paragon Bank which was new to the chart last week has in turn, been supplanted by another new entry from Sainsbury's Bank. Their Defined Access Saver – Issue 11 that is currently paying a variable rate of 1.47% AER. However, this account has tiered rates of interest meaning savers must have a minimum balance of £1,000 to qualify for the top rate. Conversely, balances in excess of £500,001 will only attract an interest rate of 0.50%. Opening and management is online and by telephone only.

For those looking for an easy access account with bonus the top rate in this chart is once again 1.50% AER, including 0.15% bonus for 12 months, being offered by Marcus by Goldman Sachs®. The Online Savings Account does not require a minimum opening deposit and allows unlimited further additions (via a nominated account) and withdrawals. This account, which must be opened online but can then be managed by phone as well, requires applicants to have a UK mobile phone number to open the account.

The best short-term fixed rate savings accounts

The best short-term fixed rates this week:

• Al Rayan Bank, Fixed Term Deposit – 2.32% AER (expected profit rate)
• Bank of London and The Middle East, Premier Deposit Account (Anticipated Profit Rate) – 2.30% AER (expected profit rate)
• Bank of London and The Middle East, Premier Deposit Account (Anticipated Profit Rate) – 2.20% AER (expected profit rate)

Sharia'a-compliant accounts continue to dominate the fixed rate charts again this week, including the short-term fixed rate savings accounts. The top rate in this chart was being offered by Al Rayan Bank, which was offering an expected profit rate of 2.32% AER (2.30% gross) on its Fixed Term Deposit. This 18-month bond requires a minimum investment of £1,000 and once opened does not allow further additions or withdrawals. It can be both opened and managed online, by post, phone, in branch and through its app.

Bank of London and The Middle East (BLME) placed second and third in the chart this week with two versions of its Premier Deposit Account (Anticipated Profit Rate). The 18-month bond offers 2.30% AER while the one-year bond offers 2.20% AER. Both accounts require a minimum investment of £1,000 and do not allow further additions or withdrawals once opened. These accounts must be opened online before becoming postal-operated. Savers should note that to open these accounts, a BLME transfer account to hold funds pending investment is needed.

The best two and three-year fixed rate savings accounts

The best medium-term fixed rates this week:

• Gatehouse Bank, Fixed Term Deposit – 2.55% AER (expected profit rate)
• Al Rayan Bank, Fixed Term Deposit – 2.52% AER (expected profit rate)
• Bank of London and The Middle East, Premier Deposit Account (Anticipated Profit Rate) – 2.50% AER (expected profit rate)
• Al Rayan Bank, Fixed Term Deposit – 2.42% AER (expected profit rate)

The best rate being offered from medium-term fixed rate saving accounts this week was again from Gatehouse Bank offering 2.55% AER on the three-year version of its Fixed Term Deposit. Savers can get this rate from an opening deposit of £1,000 while further deposits and withdrawals and not allowed. This account must be both opened and operated online.

Al Rayan Bank was in second place on the three-year fixed rate chart and topped the two-year fixed rate chart with two versions of its Fixed Term Deposit accounts. The

36-month bond offers savers 2.52% AER (2.50% gross), while the 24-month version offers 2.42% AER (2.40% gross). Both accounts require a minimum deposit of £1,000 and do not allow further additions or withdrawals once opened. They can be opened and managed online, by post, phone, in branch and through its app.

Another competitive three-year rate this week came from BLME who increased their rates by 0.10% to 2.50% AER on its Premier Deposit Account (Anticipated Profit Rate). To open this account a minimum deposit of £1,000 is required and it can only be opened online and then managed by post. Further additions or withdrawals are not permitted. Savers should note that a BLME transfer account to hold funds pending investment is needed to open this account.

The best long-term fixed rates this week:

• Gatehouse Bank, Fixed Term Deposit – 2.75% AER (expected profit rate)
• Bank of London and The Middle East, Premier Deposit Account (Anticipated Profit Rate) – 2.75% AER (expected profit rate)
• Bank of London and The Middle East, Premier Deposit Account (Anticipated Profit Rate) – 2.70% AER (expected profit rate)

To get the best savings rates this week, savers would again need to lock their money into a long-term fixed rate account. Gatehouse Bank was offering the top expected profit rate of 2.75% AER on the five-year version of its

Fixed Term Deposit. This bond requires a minimum investment of £1,000 to open and does not allow further additions or withdrawals. This account must be both opened and operated online

BLME was in second and third place on the long-term chart this week with its Premier Deposit Account (Anticipated Profit Rate). The seven-year version of this account offers savers an expected profit rate of 2.75% AER, while the five-year version offers 2.70% AER. To open either version a minimum deposit of £1,000 is required, as is a BLME transfer account to hold funds pending investment. These accounts do not allow further additions or withdrawals once opened and must be opened online before then being managed by post.

Savers looking for the ideal compromise between rate and flexibility may be tempted by a short-term bond, allowing them to get a higher interest rate than with more flexible accounts for a relatively short commitment. However, they may be disappointed to learn that rates are edging down, with data from the latest Moneyfacts UK Savings Trends Treasury Report revealing that average returns on one-year fixed bonds have fallen for the first time this year.

The average one-year fixed bond rate now stands at 1.42%, a notable drop of 0.05% from March (1.47%) and the lowest seen since October last year, when it also stood at 1.42%. It's also the largest monthly decrease seen since September 2016, and is in sharp contrast to the more recent pattern, with rates having generally edged up over the last few months.

Not only are one-year fixed bond rates falling, but the data goes on to show that longer-term rates are falling, too, with the average long-term bond rate down by 0.02% month-on-month to 1.87% – which also marks the first time both averages have dropped in the same month since January 2017. Savers also have less time to take advantage of the deals that are available, with the average shelf life of a fixed product – the time between a bond being launched and it being repriced or removed from sale – falling to 48 days, down from 69 in March and the shortest period seen since January 2017.

The following table highlights the changes in more detail:

Savings market analysis

*Longer-term fixed bonds are those with terms over 550 days. Source: Moneyfacts Treasury Reports

"This latest shift in the market will come as disappointing news to savers hoping for the market to recover at a faster pace," said Rachel Springall, finance expert at Moneyfacts.co.uk. "The drop since last month is in stark contrast to the start of 2019, where the average one-year fixed bond rate had risen consecutively – from 1.43% in January to 1.47% in March – thanks in part to the determination of challenger banks to attract new money to fund their future lending.

"However, savings providers offering a fixed rate bond commit to the interest they pay for the duration of the term, so it's no surprise that they must adapt their market position should they attract too many deposits. Therefore, this fall may well be the start of providers' attempts to sustain their offerings or reduce the cash coming in by making reductions or withdrawals – but this could drive others to follow suit as they unexpectedly climb the rate tables."

Yet savers themselves could be starting to turn away from fixed rate bonds, with consumer demand for such accounts diminishing. Indeed, additional data suggests that economic uncertainties are beginning to impact the attitude of savers as the demand for tying up their cash wanes: the Bank of England estimated that £3bn flowed into instant accounts during February, while separate figures from UK Finance revealed that deposits into accounts requiring a tie-in fell by 5.6% year-on-year, highlighting the move away from fixed accounts and the continued popularity of easy access deals.

Those who do still want the security of a fixed bond may also find that the top-paying deals don't hang around for long, as providers become quicker to reduce rates to manage the flow of funds into their business – in many cases withdrawing deals entirely. But all may not be lost, as Rachel continues:

"Although it's unfortunate to see the positive pace of rises to one-year fixed bonds so abruptly change direction, the one-year average fixed bond return stands 0.20% higher than April 2018 (1.22%). Not only this, but savers will still find competitive rates to choose from, with Islamic banks for example consistently offering decent returns and so far opting not to cut rates.

"Whether the negative direction of rate changes will continue is unknown at this stage, but with the chance of a Bank of England rate rise this year seeming to have diminished – as there are now murmurings of a rate cut being more likely – savers considering a one-year fixed bond may not want to wait too long to take advantage of the best deals."

Statistics released today show that inflation remained at 1.9% in March, which is good news for savers, as it means that they can get a better true return on their cash than if they had invested two years ago – or even just 12 months ago – as the number of savings deals that can beat inflation is increasing.

Savings boost

As inflation remains below the Government target of 2%, the latest research from Moneyfacts.co.uk shows that it also remains lower than the level seen in both April 2017, when the Consumer Prices Index (CPI) for March was announced at 2.3%, and April 2018 when inflation was 2.5%. Better still, savings rates have risen over both time periods, as the table below highlights.

Savings market analysis

**Islamic bank, pays an expected profit rate. Source: Moneyfacts.co.uk

The current level of inflation also means that 161 fixed rate bonds, 27 fixed rate ISAs
and one notice account (based on a £10,000 deposit) can now match or beat it*, and within that, 152 fixed bonds and 21 fixed ISAs pay more than 1.9%. This is in sharp contrast to recent years – in April 2017, there were no standard savings accounts that could outpace the then-inflation rate of 2.3% and in April 2018 just 10 deals could beat 2.5%, with today's figures highlighting a clear improvement.

This all means that savers can now comfortably beat inflation, though they'll need to tie up their cash to do so, as not one of these inflation-beating products allows savers instant access to their funds. However, this could be a small price to pay for real returns, so the overall picture is still positive – particularly considering how much rates have risen over the years.

Get real returns on your cash

"Savers may be pleased to find that inflation has remained at a level where they can beat its effects when it comes to their savings deposits, but they will still need to lock in their funds to avoid its eroding power," said Rachel Springall, finance expert at Moneyfacts.co.uk.

"Despite that, the proportion of the savings market that can beat its effects has grown in comparison to a year ago – when there were only 10 standard savings accounts that could outpace its impact – which means many more savers would have lost money in real terms."

Indeed, it's now possible to find accounts paying over 1.9% in the one-year bond market, meaning savers can get an inflation-beating return without needing to lock their money away for too long. For example, BLME pays an expected profit rate of 2.20% – far more than the best deal available a year ago from Al Rayan Bank, which paid expected profit of 1.85% – and two years ago, savers would have needed to fix for at least three years to earn a rate of 2% with Secure Trust Bank.

This also highlights the importance of considering accounts from the more unfamiliar brands, as they typically provide market-leading returns; both Islamic banks and challenger banks regularly top the Best Buy charts, so it could pay to opt for a lesser known name. After all, loyalty really doesn't pay.

"Although no easy access accounts can currently outpace the rate of inflation, these rates are also on the rise, with a mix of activity timed perfectly for savers who want quick access to their cash in case of emergencies," said Rachel. "Savers can now get a top rate of 1.50% from a challenger bank, which is 10 times higher than the Flexible Saver on offer from HSBC paying just 0.15%, while the best easy access account last year paid 1.30% from RCI Bank UK (though this deal has since had its rate increased to 1.42%).

"Clearly it is important that consumers look past the high street brands if they are looking for a top rate on an easy access deal, but also for fixed rates too. It remains the case that the challengers are the institutions working hardest to entice savers' deposits, so they shouldn't be overlooked."

*Data note: Please note that these savings product numbers only include deals that are available to all UK residents and excludes regular savers and children's savers (this figure does not count each interest payment option for each account), based on a £10,000 deposit.

It looks as though ISA season is already fizzing out for another year and, unfortunately, this means savers may well have missed out on some of the best deals to surface for the 2019/2020 tax year.

Indeed, fixed rate ISAs have endured cuts since 6 April, the first day of the new tax year, and a time when many savers would typically consider taking out a new deal. Our latest analysis shows that several providers have made rate cuts to their fixed ISAs in the weeks since, and some have withdrawn offers completely, suggesting that ISA season is petering out – so savers may want to act fast if they've yet to find an account for this year's allowance.

Below is a selection of just some of the fixed rate ISAs that have had their rates cut or been withdrawn from sale since the start of the new tax year, some of which were even in the Best Buys, highlighting the recent downturn.

Source: Moneyfacts.co.uk

"The ISA season buzz of April appears to have officially died down, and savers who have yet to utilise their 2019/2020 ISA allowance may have missed out on some of the top-paying fixed rate ISAs," said Rachel Springall, finance expert at Moneyfacts.co.uk. "Indeed, since 6 April, several providers have made cuts to their range, and some products have been withdrawn altogether.

"It is commonplace for there to be a last-minute dash for an ISA as a tax year ends, but for those who had already used their 2018/2019 allowance, 6 April would have been an exciting start. Sadly, some of the top deals around at the end of the last tax year have faced the chop, particularly on short-term fixed ISAs."

But what's caused the latest spate reductions? Lots of it could be due to the flood of money coming into the sector, with many providers – smaller ones especially – unable to cope with the onslaught of funds, and so are adjusting their market position accordingly. "During a period of economic uncertainty, savers may well turn to short-term fixed ISAs instead of longer-term deals, so this increased demand may have impacted the flow of funds, therefore explaining the cuts to the short-term ISA market," said Rachel.

Things may be looking dicey, but there's still plenty of opportunity for savers to find a Best Buy cash ISA, as not all providers are cutting rates. For example, the market-leading one-year fixed ISA from Kent Reliance, now paying 1.80%, welcomed a rate rise of 0.20% earlier this month, while Dudley Building Society increased its one-year deal by 0.15% to 1.71% on the first day of the new tax year, seeing it take second place in the charts.

It remains the case that non-ISAs generally pay better interest rates than their completely tax-free counterparts, but as Rachel points out, "there are longer-term benefits to utilising an ISA allowance that should not be overlooked," such as the fact that ISAs remain tax-free no matter how big a pot you accumulate. This means now's a great time to consider your options and see what deals are out there – but with ISA season drawing to a close, you may want to be quick about it!