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Five minute finance: savings accounts

Five minute finance: savings accounts

Category: Savings

Updated: 28/09/2009
First Published: 28/09/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Banks are required to hold an increased proportion of their savings deposits as reserves rather than using them for lending purposes following changes implemented by the Treasury arising from the banking crisis.

As fixed rate savings generally do not allow the saver to access funds during the term of the deal, the banks can plan more effectively to ensure they have enough money in reserve to meet the statutory requirements.

The demand for higher savings rates is driving even more modest savers to seek out fixed rate investments over easy access. Research from the Yorkshire Building Society found that a quarter of their savers were looking to invest less than £5,000 in a five year fixed rate bond, with the average balance invested £20,000.

Unsurprisingly, the research showed that 91pc of savers taking out fixed rate bonds were aged 45 years and over. Many older savers have had the opportunity to build up larger savings and are looking to capitalise on the higher rates, which fixed rate deals offer over variable rate accounts.

Barnsley takes top spot

Barnsley Building Society has just increased the rate on its Online Bond to a market leading 4.70pc. A monthly interest version is also available for those looking for a more regular income. The bond matures on 28 February 2013 and savers can invest between £100 and £2m, with further additions permitted whilst the bond remains open. Once opened, savers cannot access funds during the term.

Take notice of B&B

Bradford & Bingley has just launched its Notice Online Saver which pays a market leading rate of 3.30pc, including a variable bonus, currently 2.80pc, for 12 months. Savers can invest up to £2m into the online operated account. Savers must give 60 days' notice to access funds, although earlier access is available subject to 60 days' loss of interest. B&B has also launched its Two Year Fixed Rate ISA paying 3.75pc, the highest rate on the market for a two year commitment.

Top rates from Barclays

Savers looking for top rates from a high street bank will welcome recent moves by Barclays Bank. The provider is offering a best buy rate of 5.25pc on its 5 Year Fixed Rate Savings Bond. Those looking to commit funds for two years can achieve a rate of 3.75pc from £500 and 4.25pc on balances over £40,000. A maximum of £1m can be invested in both bonds, which are operated in branch. Once opened, further additions and earlier access to funds are not permitted.

Principality tempts older savers

From 6 October, savers aged 50 years and over will see their annual ISA allowance increased from £3,600 to £5,100. Principality Building Society has become one of the first providers to launch a new ISA aimed specifically at savers in this age range. Its new Over 50s Fixed Rate ISA pays 3.80pc and savers can up to £44,700 as transfers in are permitted. The bond matures on 30 June 2012, with access available on closure only subject to 180 days' loss of interest.

Best buy mortgage deals from first direct

first direct is the only lender in the UK offering a fixed rate offset mortgage, which allows customers to make unlimited overpayments and maintain access. The lender has this week launched a range of two fixed rate deals charging between 3.49pc and 4.34pc depending on the LTV required or between 4.24pc and 4.89pc for a three year fixed.

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.