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May magazine column


Price war breaks out in savings

Since National Savings & Investments (NS&I) announced cuts to their interest rates in September 2020, I’ve spent a lot of time writing about interest rates falling in the market.  Back then, 1.31% was available to those savers wishing to fix their money for 1 Year.  By April this year, the best buy rate fell below 0.60%.

The rate cuts at NS&I were so severe that billions of pounds flooded out into the market, helping push rates down.  Added to this, the gloomy economic outlook of the time and a prolonged period without any new entrants to the market (who have historically been the banks who have paid the best rates) and there were very few reasons to see why rates would rise.

The sole driver I could see for rate increases was a spate of competition amongst the existing providers.  That’s exactly the scenario we have playing out now.  The likes of Atom, Shawbrook, Bank of London & Middle East (BLME), Zopa, United Trust Bank and Kent Reliance have all launched best buy rates this month.


New best buys

Easy Access – Kent Reliance have broken out from the clutch of providers paying 0.40% with a table topping 0.45% on their easy access account.

Notice – Secure Trust lead the way paying 0.50% on 45 Days’ notice or 0.55% on 120 Day, which may appeal to savers who don’t want to tie their money up for a fixed period of time but don’t need immediate access to it

1 Year Fixed – Atom Bank have been in a tug of war with Shawbrook Bank for top spot.  Both providers have increased their rates more than once in the past few weeks with Atom currently topping the tables at 0.85%, with Shawbrook and BLME following behind at 0.75%.  There’s a further large drop to 0.62% for the next best offerings (Zopa and PCF Bank)

2 Year Fixed – in the space of 48 hours at the start of the month, the top five rates all changed with Zopa, Atom and BLME leading the way (0.85%) with Shawbrook (0.82%) and United Trust Bank (0.76%) in close pursuit.

3 Year Fixed – Zopa lead the way here paying 1%.

5 Year Fixed – Gatehouse Bank top the tables having increased their rate from 1.25% to 1.40% to retake top spot from Hodge Bank (1.35%)


Will the increases continue? 

It is incredibly difficult to predict where markets will move.  The rate increases from Atom and Shawbrook are out of character from their usual pricing, in that the volumes of savings they are likely to attract from their current pricing positions are out of line with their normal lending volumes.  This suggests to me that there are special circumstances, such as they could be increasing their savings stock to support the acquisition of lending books from other providers.  Given this, in my opinion, they are unlikely to be sustained and I’d urge savers to snap up any offers attractive for them, as I don’t expect the rates increases to be sustained beyond the short term.


Current Account Switching Offers

Last month I wrote about the return of offers to switch bank accounts.  After a dearth of these, March and April saw a resurgence of free cash offers from banks for you to switch your bank account.

I hope readers interested did so as they’ve almost all come to an end.  The best that remains is firstdirect, which pays £100 cash within 28 days to switchers and requires just £1,000 to be paid into the account within three months of opening. This could be your regular salary payment. 

They have historically won just about every customer service award going and come top of most of the customer polls as the best bank for service, although new banks Monzo and Starling are now rated very similarly for service and are giving firstdirect a run for their money.  They also offer a 1% regular saver account and £250 interest free overdraft.  I’ve been a customer of theirs for several years and can’t fault them.

About The Savings Guru

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