October Savings Round Up

03/10/2019

Rates continue to fall

For the past two months I have written about falling interest rates and we have seen yet another month of cuts to savings rates.

At the start of September, the best 1 Year Fixed rate from a non-Sharia provider, who typically dominate the best buy tables, was the 1.95% payed by SmartSave.  This month, the best rate is 1.80% from Zenith Bank or 1.76% from Ikano Bank.

The Sharia providers have joined in too with Bank of London & Middle East losing their top spots in many categories, following a round of cuts to their products.  Gatehouse Bank has followed suit, leaving Al-Rayan Bank top in many categories. 

As predicted last month, Shawbrook Bank cut the rate on their easy access account from 1.48% and now pay 1.25%.  I also wrote that I expected Marcus to maintain their best buy position in easy access.  In a surprise move, they cut their bonus element on the account by 5 basis points dropping the overall rate to 1.45%, although this has kept them second in our best buy tables.  Those who took my timely advice, about the option to renew the bonus on their Marcus account, will still be able to enjoy the full 1.50% rate for the next 12 months.

New best buy easy access account

There was some good news for savers last month, with Al-Rayan Bank launching a new easy access bank paying 1.60%, which can be opened with a balance of £500.  This is the best easy access rate seen for over two years.

The account can be opened online, by post or via the Bank’s mobile app, although when we tried to download this to test it, the app cannot be downloaded from the Apple app store.  The 27 reviews average score for the app is 1.3 stars and reviews suggest that the app needs some serious new investment.  Al-Rayan have just announced the appointment of a new Head of IT so hopefully the app will be high on his priority list for his new role.

Undeterred, I completed an online application, which took a reasonable eight minutes.  It’s a straightforward process although contains unnecessary questions (for the applicant) on topics like your number of dependents, net worth and national insurance number.

Al-Rayan and its Sharia cohorts, Gatehouse Bank and Bank of London & The Middle East, have offered some excellent savings rates in the past few years.  They typically dominate the best buy tables.  They have had to offer attractive rates as some savers are deterred from saving with them because they pay an expected profit rate, rather than an interest rate.  The former isn’t guaranteed, where the latter is.  Although they have all consistently paid their expected profit rate, some savers – particularly those burned during the last financial crisis - just simply do not want to risk it.

On a longer term fixed rate product, this is understandable, and the security of a guaranteed interest rate will be worth sacrificing a slightly higher return for.  However, on easy access accounts, the worst case scenario is having a month’s interest paid at a lower expected profit rate.  In which case, savers can simply switch product.

With Al-Rayan Bank paying 0.15% more than their nearest rivals, Marcus by Goldman Sachs and Virgin Money, this is an opportune time for savers to consider a Sharia savings account.  On £10,000 of savings, it’s an extra £15 of interest per annum so savers with larger pots should certainly give it consideration.

Good news for business savers

September was a good month for business savers with rates on many products as good as, or better than those paid to personal customers.  Al-Rayan’s easy access account, for example, is also available to businesses and their rate dwarfs the nearest rival, Saffron Building Society, which pays 1.02%.

On notice accounts, Redwood Bank launched a 95 days’ notice account paying 1.75%, just ahead of Hampshire Trust Bank’s 1.70% for 90 days’ notice.  On 1 Year Fixed rates, Al-Rayan Bank’s 2.07% just pips Redwood’s 2%, which beats anything on offer to personal customers.

Business customers are often guilty of leaving money languishing in current accounts paying no interest.  If that’s your business, now is certainly a good time to review that!

What are the best rates currently? 

As we have witnessed in the past couple of months, the savings market can change extremely quickly.  We always recommend that you check our website for the latest rates.  At time of print, our best personal savings rates are:

That’s all for this month.  If you don’t want to wait for next month’s update, then you can subscribe to our newsletter by submitting your email address on our website!