Interest rates on savings accounts are finally starting to creep upwards, but savers are still losing more to inflation than they are earning from interest, according to Moneyfacts.
The financial data analysts said this week that rates across the savings market have risen for 13 consecutive months, and are continuing to outweigh cuts.
However, before you break out the champagne (or should that be cava?), rates remain pitifully low compared with historic normal levels, and don’t come close to the 3% inflation rate.
This week, Nationwide launched a five-year fixed-rate Isa. This matches the other top-paying accounts over five years, but is still at just 2%. Putting money into this will look a poor decision if the Bank of England starts raising base rates as expected. PCF Bank has a two-year fixed-rate bond paying 2.05% – although there is £1,000 minimum deposit.
Probably a better bet for those with cash to deposit is a short-term account, and hope rates start rising. Tesco bank is currently paying 1.3% on its no-notice interest saver with a £1 minimum deposit.
If you prefer a cash Isa, consider Marsden building society which is paying the top rate – 1.3%. There is a minimum opening deposit of £5,000 and it allows transfers in from other providers. Savers can withdraw their money, penalty free, by 120 days notice. Virgin Money is paying 1.21% on its no-notice Isa.
If you are happy to lock your money away for 12 months, Atom bank pays 1.95% (min £50 deposit).
Rachel Springall, a finance expert at moneyfacts.co.uk, says: “It’s great to see savings rates improving for yet another month, largely fuelled by competition amongst the challenger banks. But there are still quite a few variable savings accounts paying less than 0.5%, with around half of the easy-access market failing to match this level. It’s really important for savers to shop around and consider one of the lesser-known brands.”
