Amid the mortgage misery, there was more good news this week on savings rates, with a growing number of accounts now paying 6%-plus interest.
Meanwhile, the government-backed NS&I – a favourite of many in these uncertain times – has upped the rates on some of its popular fixed-rate accounts.
The UK’s largest high street banks had a meeting this month with the City regulator and were urged to “accelerate” savings rates after being accused of fobbing off millions of loyal customers with “measly” returns.
At the time of writing, Santander’s Everyday Saver account was paying 0.85%, while Lloyds Bank’s Easy Saver was offering 0.9% unless customers had £25,000-plus stashed away. Virgin Money’s Everyday Saver was paying only 0.25%.
However, many challenger banks and building societies, in particular, are offering much better returns than that.
On Thursday, Yorkshire building society launched a new range of fixed-rate savings bonds, including a “limited issue” one-year loyalty bond with an interest rate of 6%. It is available from branches and agencies, by post, and to members already registered online. To be eligible, you must have held a savings or mortgage account with Yorkshire for at least a year.
It has also launched a 5.3% one-year fixed-rate bond and a 5.5% two-year bond, available to new and existing customers.
All three bonds can be opened with a minimum balance of £1,000, no access to your cash is allowed during the term, and they mature on either 31 August 2024 or 2025.
Also on Thursday, Ford Money increased the rate on its Fixed Saver One-Year and Two-Year products to 5.95% and 6.05%, respectively.
The average one-year fixed savings rate stood at 5.03% on Thursday, and was up from 4.83% a week earlier, according to the financial data provider Moneyfacts.
However, there are a growing number of providers paying 6%-plus to those willing and able to tie up some savings cash for a year, including FirstSave, Atom Bank and Monument Bank.
A number of two- and three-year fixed-rate savings bonds also pay 6%-plus.
NS&I has also been upping its fixed rates. This week, its popular one-year guaranteed growth bonds and guaranteed income bonds had their rates increased to 5% for new customers – up from the previous 4% and 3.9% respectively.
The rate NS&I offers on its two- and three-year guaranteed growth bonds and guaranteed income bonds – which are not currently on sale but are available to existing customers who reach the end of their fixed term – has also been increased and is now 5.1%.
Sarah Coles, the head of personal finance at the investment platform Hargreaves Lansdown, said of NS&I’s move: “While 5% is an improvement, it’s far from the most competitive.”
Myron Jobson, the senior personal finance analyst at the rival platform Interactive Investor, said: “The stark reality is while there has been a reprieve in savings rates, they continue to run a losing race against the stubbornly high cost of living.”
He added that those who could afford to put money away for five years or more “should consider investing for the potential of long-term inflation-beating returns that far outstrip savings rates”.
