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Derin Clark

Derin Clark

Online Reporter
Published: 11/08/2020

The race to the bottom of the savings chart after the Bank of England cut interest rates to 0.1% in March and launched a new Term Funding Scheme with additional incentives for SMEs (TFSME) seems to have temporarily halted, as several banks have increased rates over the last month.

Since the start of July, QIB (UK), Charter Savings Bank and United Trust Bank have all increased their one year fixed rate bonds more than once. In fact, both Charter Savings Bank and United Trust Bank have increased rates three times over the last month. Not only have these banks been increasing rates, but they all now sit within the top six best deals in the one year fixed rate bond chart.

QIB (UK) offers the best one year fixed bond rate overall, with its Raisin UK – 1 Year Fixed Term Deposit paying an expected profit rate of 1.20% gross on maturity. Secure Trust Bank offers the second-best one year fixed bond rate, with its 1 Year Fixed Rate Bond paying 1.16% gross yearly, while the third-best rate for a one year fixed bond comes from OakNorth Bank, which pays 1.11% on its Fixed Term Deposit. United Trust Bank pays the fourth-best rate on its UTB 1 Year Bond, which pays 1.10% gross on anniversary.

Why are banks increasing rates?

Although this is good news for savers, as it could signal the start of rates rising across savings charts, these increases are likely to be short-lived. It is possible that QIB (UK), Charter Savings Bank and United Trust Bank, which are all challenger banks, are looking to increase deposits to fund future lending during a period of uncertainty.

In addition to this, banks are still flush with money received from the TFSME, which was launched in April. Back in April, we reported that it is likely that the launch of this new scheme, which was set-up to encourage lending to SMEs, could result in savings rates falling as banks become less reliant on attracting deposits from savers to boost funds for lending. Our research at the time found that when similar schemes were launched in 2012 and 2016, saving rates subsequently fell.

“In the years after 2012, savings interest dwindled and the only respite was seen in 2018 when the Bank of England base rate rose to 0.75%, the highest level seen since 2009,” explained Rachel Springall, finance expert at “However, the damage on the savings market had already been done and many of the high street banks failed to pass on this 0.25% rate rise to their easy access accounts, the more popular type of account due to their flexibility. During this time, challenger banks held competitive positions in the top rate tables for both easy access and fixed bonds, including Islamic banks that offered attractive expected profit rates.

“Fast-forward to now, it is clear as day to see that challenger banks are a good choice for savers looking for a competitive return on their hard-earned cash. Those looking for a guaranteed return may then wish to choose a one-year fixed bond should rates fall further. However, those who need flexibility in these uncertain times may turn to easy access instead, and apart from National Savings & Investments (NS&I) leading the market to draw in funds, it is the challenger banks and mutuals who are offering the best deals around.

“It is vital that savers act quickly to take advantage of the top rate deals and also to switch if they find they are earning a poor return, especially if they have their cash in an easy access account with a high street bank. The next 12 months look uncertain for the savings market and any positive changes now could be fleeting. Consumers would be wise to remain vigilant and consider the more unfamiliar challenger banks if they hope to secure a lucrative return on their cash during this time.”


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