Savers reap rewards from rising interest rates
Don’t assume, however, that your bank or building society will automatically up its savings rates following a rate rise – the onus is still on savers to hunt out the best returns.
The Bank of England is raised its interest rates on the 2nd February, boosting returns for savers.
Don’t assume, however, that your bank or building society will automatically up its savings rates following a rate rise – the onus is still on savers to hunt out the best returns.
Some of the top savings rates are offered by fixed rate bonds, which require you to tie up your money for a set period. As a general rule, the longer you’re prepared to leave your savings untouched, the higher the returns you can earn. According to analysis by Moneyfacts.co.uk, if you made a £10,000 deposit into the five-year fixed account prior to the Bank of England starting its series of rate increases in December 2021, paying an average 1.42%, your savings would make £730.45 in interest by the time the five-year term finishes.
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However, if you made the same investment into the average five-year fixed account this January at 4.02%, you would earn almost three times as much interest, getting back £2,178.23 on top of your original deposit at the end of your five-year period.
Current best buy five-year bond rates include raison’s five year Fixed Term Deposit account, provided by Isbank, which pays 4.5% on a minimum deposit of £1,000, and Atom Bank’s five year Fixed Saver account paying 4.45%. The Atom Bank account can be opened with a minimum deposit of £50.
If you don’t want to tie your savings up, there are several competitive easy access options to choose from. Shawbrook Bank’s Easy Access account Issue 32 pays 2.92% annual interest before tax on a minimum balance of £1,000 and you can make as many withdrawals as you like. Alternatively, Kroo is from 1 February paying 3.03% AER on balances up to £85,000 held in its current account.
Anna Bowes, founder of savings website SavingsChampion.co.uk, said: “The main thing to remember is that not all providers behave in the same way and therefore it’s important not to simply assume your bank or building society is treating you fairly – so check the rates you are earning and shop around to see if you can put more precious pounds in your pocket.”
Premium Bonds prize fund rate also on the up
Government-backed savings provider NS&I is among those who’ve recently announced rate rises, upping the rate on some of its savings accounts, as well as the prize fund rate on Premium Bonds. There will be three more prizes of £100,000 and six more prizes of £50,000 each month, starting from the February draw. There will also be over 121,000 more £50 and £100 prizes each to be won, although there will be nearly 242,000 fewer £25 prizes. The odds of winning some sort of prize remain unchanged at 24,000 to one.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown: “This is a canny response to inflation. With rapid price rises on all sides, £25 is unlikely to feel quite as rewarding as it did a year ago. By adding so many more £50 and £100 prizes it means more people are winning sums that feel like they will make a difference.”