A new savings account has been launched that pays an inflation-beating 9% interest – hours after a rival institution unveiled an account paying 7.5%.
The Bank of England’s 12 interest rate rises in a row have spelled pain for millions of people with existing mortgages and those looking to take one out, but the flipside is that savers are now being offered some of the highest rates for more than a decade.
However, many of the deals offering the highest rates have a number of strings attached. The “market-leading” account paying a fixed 9% interest launched by Saffron building society is only available to people who have been members of the Essex-based institution for a year or more.
That rate is especially notable because it beats the rate of inflation, as measured by the consumer prices index, which stood at 8.7% in April. It is also double the current Bank of England base rate of 4.5%.
Savings rates have been rising, yet the returns offered by some widely held high street bank accounts are still less than 1%. Earlier this year, MPs criticised bank bosses over their low savings rates, particularly on instant access accounts, saying that they seemed to be “taking advantage” of loyal customers.
However, some smaller players and challenger banks are putting pressure on their bigger rivals. It was not immediately clear when a savings account last offered a rate of 9%-plus, though in 2007, Barclays launched a regular savings account with an interest rate of 12.5%.
The Saffron serves more than 100,000 members across the UK, though its branches are based in the east of England. Its new “limited edition” savings account can be opened with a minimum deposit of £1, and the most that can be paid in a month is £50. The interest will be paid when it matures after 12 months, meaning in practice the maximum that can be paid into this account is £600.
The Saffron’s new product emerged hours after Skipton building society launched an account that works in a similar way and pays what it said on Thursday morning was a “best-buy” rate of 7.5%.
This account is exclusively available to the Skipton’s 1.1 million members who joined on or before 31 May this year. It allows people to stash away more cash than the Saffron’s product: up to £3,000 a year.
Maitham Mohsin, the head of savings at the Skipton, said: “With billions of pounds just left in accounts paying virtually no interest, it’s so important that Britons act now, grab their money by the scruff of its neck, and start making their money work hard for them.”
