Sharia banks offer glimmer of hope for savers after interest rates halve in a year

The average interest rate for a one-year fixed rate bond is now 0.70%, a fall of more than half compared to July last year when the average was 1.41%. Today, QIB (UK) has launched four new fixed rate bonds and its 9, 12 and 18-month bonds all offer the best rate for their respective terms.

The Sharia banking sector has become increasingly dominant in the savings market with BLME regularly offering the best interest rates for fixed rate bonds. Sharia banks currently offer five of the top 10 best rates for fixed rate accounts of less than 18-months. The remaining places are held by challenger banks; Allica Bank which launched its first savings account at the beginning of 2020 and Masthaven Bank which had its fourth birthday as a licensed bank this year, with a specialist bank and a credit union filling the remaining slots.

Savers wanting the absolute best rates on a short -term bond will need to choose an 18-month bond term from either QIB or BLME, both of whom now offer the leading expected profit rate of 1.15%.

QIB (UK) is a fully UK authorised bank and savings held with QIB (UK) are covered by the Financial Services Compensation Scheme (FSCS). Its new savings accounts can be opened online through Raisin, a savings platform:

• 9-Month Fixed Term Deposit – 0.90% AER expected profit rate
• 12-Month Fixed Term Deposit – 1.05% AER expected profit rate
• 18-Month Fixed Term Deposit – 1.15% AER expected profit rate

Savers looking for a longer term will also find a two-year option available from QIB (UK) at 1.25% AER expected profit rate, however the top rate available remains with BLME and its 2 Year Premier Deposit Account (1.35% AER expected profit rate).

QIB (UK) started operating in the UK in 1982 and achieved a full banking licence in 2008. It is part of the QIB banking group, headquartered in Qatar. The bank claims to be the largest Islamic bank with a 42% share of the Islamic banking sector. All their savings accounts in the UK are covered by the FSCS.

As a Sharia compliant bank, it does not offer fixed rates of interest, instead savings accounts come with an expected or anticipated profit rate. There is more information about how interest works in our guide to Sharia banks.

QIB (UK) works with Raisin UK to offer an online application process and management tool for savers. Savers wanting to open one of the QIB (UK) accounts will need to register with the Raisin UK service, and can then proceed to open their account. Raisin UK is a marketplace for savings accounts, meaning that once savers are registered, they can use the service to open a range of savings accounts with different providers. In addition, savers who sign up to Raisin UK and then open and fund a savings account will be able to claim a welcome bonus of £10.