Savings account: New 1.2% rate launched as savers ‘aren’t hunting for the best deal’

Martin Lewis advises on savings accounts for deposits

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Savings rates remain low at the moment but banks and other financial companies are regularly launching new deals to entice customers. Today, Moneyfacts.co.uk released its latest “Pick of the Week” which highlighted three accounts that have received a boost.

The first comes from DF Capital, which has launched a new account and interest rate for savers.

Eleanor Williams, a Finance Expert at Moneyfacts.co.uk, explained: “DF Capital has launched a new 18 Month Fixed Rate Deposit this week which pays 1.20 percent on maturity.

“This account takes the lead position when compared against other bonds with similar terms which are currently on offer.

“As is common in the fixed bond sector, early access is not permitted, however, further additions can be made within 14-days of account opening, which could be a plus for some investors.

“Available for minimum investments of £1,000, this could be a tempting proposition for those happy to lock their savings away for the 18-month term and savers may be pleased to note that the account secures an Excellent Moneyfacts product rating.”

Tandem Bank has also increased rates on one of its existing deals.

Ms Williams continued: “One of the accounts to receive a rate increase from Tandem Bank this week is the 1 Year Fixed Saver. Now paying 1.11 percent on anniversary, the account has improved its position in the top ten when compared to other fixed bonds currently available with a similar term.

“Savers who are happy to secure their funds away for the term could be tempted by the return but must ensure they are happy to commit at the outset as early access is not permitted on this account, however, further additions are possible within 14-days of opening the account, which could be a positive for some. Overall, the account secures an Excellent Moneyfacts product rating.”

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Ms Williams concluded on the third, and final, savings account highlighted by Moneyfacts.co.uk: “Savers still to use their ISA allowance may wish to note that among the products to be updated this week is Shawbrook Bank’s 2 Year ISA. Receiving a rate increase of 0.03 percent, this ISA now pays 0.91 percent on anniversary, seeing this account improve its position in our top rate tables.

“Those looking to supplement their income may be interested to note that this account also offers a monthly interest option, which could be a benefit for some.

“Additionally, the appeal of this fixed rate ISA is boosted further by the fact that there is some flexibility to access funds early as this is permitted subject to an interest penalty. On balance, this account receives an Excellent Moneyfacts product rating.”

Providers of long term savings accounts may be keen to make improvements such as these given recent data from CACI.

Paragon Bank, in examining CACI data, showed easy access non-ISA savings have grown their market share consistently throughout the last year, and now account for a record 60 percent of the total savings market.

Savings balances recorded on the CACI database, which records data from over 30 providers including the biggest banks, showed the easy access non-ISA market has grown by £80billion since the pandemic began in March 2020, an increase of 14 percent.

Another product to perform particularly well over the course of the last 18 months has been the regular saver non-ISA category, which grew by 23 percent and now represents 1.6 percent of the market (up from 1.3 percent at the start of the pandemic).

The fixed rate non-ISA market, on the other hand, has dipped steadily throughout the pandemic, reducing from 10.3 percent in March 2020 to 7.69 percent in May.

Derek Sprawling, a Savings Director at Paragon Bank, commented on the findings: “While Bank of England data shows that the rate households are saving is slowing down as pandemic restrictions lift, easy access balances have continued to grow at a rapid pace throughout the pandemic.

“We are seeing a gradual uptick in rates and best-buy deals on easy access, however 72 percent of easy access balances are still receiving a rate of 0.1 percent or less, which shows that savers aren’t hunting for the best deal.

“A large share of easy access balances continues to sit with high street banks, despite those traditionally offering much lower rates than average.

“Challengers and mid-tier providers, on the other hand, are usually at the top of the best-buy tables. They offer savers the opportunity to more than double their returns as the providers that target proactive savers compete with each other.

“We are also seeing rates across the fixed rate market pick up, so it will be interesting to see the impact this has on that category’s market share as we progress into autumn.”

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