Over the past few weeks a number of providers have withdrawn leading fixed rate deals, because swap rates, which such products are priced against, have fallen back. However, ICICI's move demonstrates that providers will have to continue offering rates significantly higher than the wholesale rates if they want to pull in large volumes of money.
Kevin Mountford, head of savings at moneysupermarket.com said: "ICICI has really put the cat amongst the pigeons by offering this fantastic rate for savers who are willing to lock up their cash for a year - especially as it is a standalone offering. It's especially good news for savers who will have recently been disappointed with the withdrawal of the top two highest rates less than two weeks ago.
"In the past providers would usually only offer such competitive rates for customers with linked products, such as the last ICICI offering when savers had to also invest in the easy access savings account to get the high rate on the fixed rate bond.
"It will be interesting to see how UK providers react to a foreign provider yet again raising the bar in the British savings market."
What's the deal?
ICICI's new HiSAVE one-year fixed rate bond is paying a market-leading rate of 7.2%. The previous version of the account, which had a lower rate of 7.0%, was only available to customers who had a HiSAVE instant access account, but the new 7.2% product is available as a standalone product. The minimum deposit is £1,000 and withdrawals are not permitted during the 12-month fixed-rate term.
Fixed rate bonds are savings accounts that pay a fixed rate of interest for a set period of time, often one, two or three years, and the highest-paying deals tend not to allow you to access your money during the fixed term.
That said, some products do offer a certain level of flexibility: ICICI for example, allows you to close the account early although if you do that you will receive a lower rate of 6.75%. This is still higher than the rate offered by the leading easy access accounts, so if you have a lump sum you will need at some point within the next year this product is still worth considering. However, it won't be suitable if you will need to make regular withdrawals - in this scenario, an easy access account is what you need.
What else is available?
Foreign banks are dominating the fixed rate market at the moment. Icelandic Bank Kaupthing Edge is offering 7.15%, Nigerian Bank FirstSave 7.10% and Icelandic bank Icesave 7.06%. All three deals are available to those with between £1,000 and £2m to invest.
However, there are a handful of 7%-plus deals available from British institutions: The Post Office has a fixed rate bond with a minimum investment of just £500 (max £1m) at an attractive rate of 7.05%, while Birmingham Midshires is paying 7.01% on balances of £1 or more.
If it's an easy access account that you're after, Birmingham Midshires' e-Saver Account (issue 2) is paying 6.52%, while Bradford & Bingley's Internet Saver 3 has a rate of 6.51%.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.
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