United Kingdom

Best buy savings accounts continue to disappear

Savers are being urged to snap up top one-year fixed rates before they disappear — but you should avoid locking in for longer.

Big banks and building societies have already slashed one-year deals to below 0.5 per cent, but newer banks are now following suit with devastating cuts of their own.

Some are even withdrawing from the savings market entirely, causing fixed rates to hit a near record low.

Big banks and building societies have already slashed one-year deals to below 0.5 per cent, but newer banks are now following suit with devastating cuts of their own

Wyelands Bank, Ford Money and Secure Trust, for example, are no longer offering fixed-rate bonds at all — and Virgin Money, Masthaven, Atom, Paragon, Shawbrook, Hampshire Trust, Investec and United Trust banks have all slashed their rates.

The cuts follow the fall in the Bank of England base rate to its all-time low of 0.1 per cent in March. 

Since then, easy-access rates have plummeted, with the average account now paying just 0.3 per cent compared with 0.75 per cent ten years ago during the financial crisis. 

The average one-year fixed-rate bond on sale now is 0.92 per cent — only a sliver above the 0.9 per cent low in February 2017 after the Bank of England cut the base rate to 0.25 per cent.

Rachel Springall, a finance expert at Moneyfacts, says: 'Easy access accounts are at a record low and fixed-rate bonds are heading that way too.'

Steer clear of the traditional banks and building societies. 

Big banks pay less than 0.5 per cent, with TSB and Santander among the worst, offering only 0.3 per cent and 0.35 per cent respectively. 

New banks typically pay much higher rates but even they are offering meagre pickings.

Since January 1, top deals on one-year fixed-rate bonds have fallen from 2 per cent to 1.3 per cent.

From time to time, new banks reappear with top rates if they need to bring in money. It is hoped that as the housing market starts to pick up, they will return to market to raise bigger chunks of cash to lend out. 

But act fast when you see them — after launching a top rate, banks get swamped as savers rush in. The bond is then quickly withdrawn from sale.

At present, the best one-year rates include 1.3 per cent with Atom Bank or 1.25 per cent with Kent Reliance, Investec Bank or RCI Bank.

Kevin Mountford, chief executive at savings platform Raisin UK, says: 'If you see a good fixed-rate, go for it, as long as you can afford to tie up your money.' But he advises savers to stick to one-year deals.

You get as little as 0.05 percentage points extra for picking a two-year deal — worth just £5 more in interest a year on each £10,000.

And you could then lose out if rates improve by this time next year.

On easy-access accounts you'll see just 0.01 per cent from High Street banks.

Accounts with newer banks such as Marcus by Goldman Sachs and RCI Freedom account pay 1.05 per cent.

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