Top Savings News

Derin Clark

Derin Clark

Online Reporter
Published: 24/05/2019

Research released this week revealed that the number of inflation-beating fixed rate bonds available has risen in the past 12 months, despite inflation increasing to 2.1% during April. The research carried out by Moneyfacts shows that there are currently 108 fixed rate bonds and seven fixed rate ISAs (based on a £10,000 deposit) available that beat inflation and of these 91 fixed rate bonds and three fixed rate ISAs pay more than 2.1%.

Savers looking to beat the eroding impact of inflation will find that fixed bond rates have risen in the past 12 months, so they can now get a better true return on their cash. Happily, easy access and notice account rates are also increasing, however none of the rates on offer in these sectors are currently able to beat inflation – which means that, if you want to get a real return, now could be the time to lock your cash away.

The cash ISA market has enjoyed something of a resurgence recently, with data from the latest Moneyfacts UK Savings Trends Treasury Report showing that not only have product numbers risen since the Personal Savings Allowance (PSA) was introduced in 2016, but consumer demand for cash ISAs is on the rise, suggesting that savers are looking to future-proof their funds to benefit from tax-efficiency for the long term.

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


Shelf life and average rates


Apr 2018


Jan 2019


Mar 2019


Apr 2019


Fixed rate bond shelf life (days)


56


62


69


48


Average one-year fixed bond


1.22%


1.43%


1.47%


1.42%


Average longer-term fixed bond*


1.69%


1.86%


1.89%


1.87%

*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."

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