The latest movements
Barnsley Building Society are dominating the fixed rate best buy tables. It is offering a five-year fixed rate bond paying 5.40%, four-year deal at 5.15% and three-year account at 5.00%.
We've also seen a new player enter the market. Aldermore Bank is effectively the relaunch of Ruffler, a small private bank that was taken over by private equity group Anacap Financial Partners, and it is offering another 5%-plus account. Its five-year fixed rate bond is paying
5.21% - not quite a market-leader, but its new two-year bond tops the two-year fixed table at
4.43% on balances of £10,000 or more.
These rates are quite incredible given that the Bank of England base rate is still 0.50% and millions of savers have money in accounts paying even less than that - the average instant access account is paying just 0.15%. It goes to show how valuable our savings continue to be to banks and building societies at the moment.
And to put it bluntly, if you've got money languishing in a poor paying account, move it. As highlighted the other week, the nation's savers are collectively losing out on interest of
£7.7billion a year. The reason for this? Our apathy.
So be proactive and move your money. Someone with £10,000 sitting in an account paying the average rate of 0.15%, could earn £525 a year more in gross interest by moving it to an account paying 5.40%.
Think before you fix
Fixed rate accounts are offering the highest rates but they won't suit everyone - you can't usually access your money during the fixed term, which is a major thing to consider if you're thinking about a four or five-year deal. You may decide a shorter term product is a better option even if you have to accept a lower rate.
Also, fixed bonds are aimed at those with a lump sum to invest and many only allow a single deposit to be made at the time the account is opened.
More details on the leading fixed rates
It's worth explaining a little more about the new deals from Barnsley. You could be forgiven for being confused if you look at the best buy tables because they are effectively two versions of the same product. For example, Barnsley's five-year Online Bond is paying 5.40%, as is its five-year Fixed Rate Bond. But the online version, as its name suggests, is an internet-only account, while the 'Fixed Rate Bond' is a branch based account.
The same applies for the three and four-year products so your preferred transaction method will influence your product choice, as well as the length of time you can afford to lock your money away for.
If five years is too long, Barnsley's 5.00% three-year bonds are the best in the market - the minimum deposit is just £100. Other options include ICICI Bank's three-year Fixed Rate HiSave Account at 4.60%, available for deposits of £1,000 or more, while Aldermore and West Bromwich building society have three-year bonds paying 4.55%.
As already mentioned, Aldermore has the leading two-year bond at
4.43% but
ICICI Bank and The AA have two-year deals at
4.35%.
If you can only afford to lock your money away for a year, the leading deals are the Post Office Growth Bond, which is paying 3.85%, while Derbyshire Building Society's Fixed Rate Bond Issue 178 has a rate of 3.75%, fixed until August 31, 2010.
What about easy access?
Even if you dip in and out of your savings, it doesn't mean you should leave your money where it is. While the rates on easy access accounts are lower than those on the best fixed rate bonds, you can still earn around 3.00% which means £285 a year more in gross interest on £10,000 than if the money was earning the average rate of 0.15%.
Coventry Building Society's 1st Class Postal Account has the leading rate at 3.30% although this includes a 12-month bonus of 1.30%. The minimum balance is £1,000 and you can only make four penalty-free withdrawals a year. It's also worth noting that if you do want to take money out, the minimum withdrawal is £1,000. It is therefore not the most flexible easy access account.
There are other competitive deals with fewer restrictions:
Alliance & Leicester's Online Saver Issue 5 and Birmingham Midshires' Telephone Extra accounts, for example, both pay
3.15% on balances of £1 or more. The rates include a bonus - A&L's lasts until August 2 2010, while the introductory rate on the Birmingham Midshires' account is a 12-month offer.
Alternatively, Citibank's Flexible Saver Issue 5 is paying 3.10% - this includes a 12-month bonus of 2.10% - while ING Direct's Savings Account pays 3.00%. This rate is fixed for a year after which the rate switches to ING's standard rate which is variable and is currently 0.5%. These four accounts all allow unlimited penalty-free withdrawals.
We've seen an increasing number of easy access accounts with strings attached - some of the catches to look out for are mentioned above: limited penalty-free withdrawals, introductory bonuses etc. But a new account from Lloyds TSB stretches the definition of 'easy access' to the limit. It is riddled with restrictions so don't sign up for this deal unless you can adhere to the terms and conditions.
Only available to Lloyds TSB current account customers, the Incentive Saver pays 3.04% on balances between £1 and £50,000. However, while you can take money out of the account, you won't earn any interest in a month a withdrawal is made. Also, this is a 12-month account - it matures into Lloyds' Easy Saver account which is currently paying 0.10% so you will need to move your money again at that time.
For more information on savings rates, visit our
savings channel.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing. Products underlined can be applied for directly.
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