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Savings - highest fixed savings rates in nearly two years 

article3may18

It seems to be less of a question of whether the Bank of England base rate will rise, as to exactly when it will do so.

On the 8th of February 2018, the Guardian newspaper, for example, argued that an increase in the current base interest rate of 0.5% could be expected as early as May; whilst by the 13th of May, City AM reported that it did not expect rates to increase until November of this year.

Fixed savings rates

Although there is yet no agreement on exactly when there might be an increase in the Bank of England base rate, its anticipation some time in the coming 12 months has prompted a rise in the top-performing fixed savings rates to reach the highest level in almost two years.

Quoting the online data company Moneyfacts, the Telegraph newspaper reported on the 5th of April that the average rate of interest on long-term savings bonds now stood at 1.68% - its highest since June 2016. Fixed rate savings bonds, of course, offer the opportunity of committing your funds for a pre-determined period, during which the savings are protected against any cuts in the base rate which may come at a later date.

Some of the most competitive rates of interest on fixed savings are currently offered by smaller, online-only banks – many of the names are likely to be relatively unfamiliar to the majority of savers. With banks that are relatively unknown, you might want to pay particular care to ensure that your deposits are covered by the Financial Compensation Services Scheme (FCSC), which protects up to £85,000 of your savings.

Fixed rate savings

As at the beginning of April, some of the top-performing fixed rate savings bonds included:

One-year fixed rate

  • Ikano Bank (based in Sweden and covered by a deposit protection scheme similar to the FCSC, up to £85,000) offers a top rate of 1.85% in the first year, during which there is no access to your funds;
  • after the first year, the rate of interest is variable and is currently 1.01%;
  • a minimum £1,000 deposit is required;

Two-year fixed rate

  • both Ikano Bank and Secure Trust Bank offer a fixed savings rate of 2.1% on deposits locked in until the end of April 2020;
  • there is no access to your funds during this fixed term, and a minimum deposit of £1,000 is required to open an account;

Three-year fixed rate

  • Vanquis Bank Savings currently offers a rate of 2.3% on its top-performing three-year fixed rate bond;
  • once again, that rate of interest is provided only if you do not access your savings until the end of the agreed term;
  • a minimum deposit of £1,000 is required, and your account may be managed online, by phone or by post;

Four-year fixed rate

  • Vanquis Bank Savings also has a four-year fixed rate savings account offering a return of 2.47% on a minimum deposit of £1,000; and

Five-year fixed rate

  • if you are prepared to lock up your funds until the 3rd of May 2023, Secure Trust Bank offers a fixed rate of return of 2.65% on a minimum deposit of £1,000.

Whilst fixed rate savings rates are taking a welcome change for the better, it is important to remember that these may change at short notice and reflect anticipation of the timing of any change in the Bank of England base rate.

This is for information purposes only and does not constitute financial advice

IPSL2018238P   8.5.2018

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