Notice accounts flourish for short-term savers

Home News Savings Notice accounts flourish for short-term savers

Michelle Monck

Consumer Finance Expert

Published: 04/10/2021

Average rates for notice savings accounts have increased to their highest levels in 2021 so far at 0.54%, an increase of 0.36% compared to the lowest average rate recorded in May 2021. The very best notice account rate of 1.10% gross is now more than double than that available in April this year at 0.52% gross.

Savers thinking about which type of savings account to choose will see that the very best rates continue to be from fixed rate bonds. The top 18-month fixed rate is 1.60% gross (expected profit rate) and the top 12-month fixed rate bond is 1.45% gross (expected profit rate). Savers need to consider if restricted access to their funds for 12 or 18 months is worth the greater rate of interest compared to waiting 95 days with the top notice account paying 1.10% gross.

Not only are notice account rates on the rise, but the number of these available has also increased. This increased competition is being driven largely by the challenger banks, with these holding all the top rates across fixed rates and notice accounts.

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“Notice accounts are flourishing as savings providers have significantly improved rates and expanded choice. There are now more notice account options available, the highest count since December 2020. Savers looking for a decent return on their cash may have noticed a rise in short-term fixed bond rates recently, but a notice account may be a more suitable alternative for those who are not comfortable with locking their cash away for too long.

“Six months ago, the average notice account rate was 0.37% and in May 2021 it fell to a record low of 0.36%, but this has since risen to 0.54% thanks to significant improvement in competition. In April 2021 the top notice account paid 0.65% and in fact one of the top six deals paid 0.52%, so today’s market-leading rate of 1.10% pays more than double the amount of interest. Unlike fixed bonds, notice accounts pay a variable rate, but the ability to give notice to access funds may be more favourable to some savers and the maximum notice term today is about four months.

“Consumers comparing different savings accounts may also appreciate that most notice accounts will allow them to deposit funds little and often, unlike fixed bonds which typically require an upfront lump sum at the point of application. There are many notice accounts that pay better variable rates than easy access accounts too if savers are happy to give notice to access their cash. As the market continues to improve, it would be wise for consumers to keep a close eye on the top rate tables and be quick to apply so that they are not left disappointed.”

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