Earn more than 3% on your savings

Leeds BS has hiked the rates on its Cash ISAs and bonds, taking it to the top of the best buy tables.

Leeds Building Society has edged back to the top of the savings tables by increasing the rates on its five-year fixed rate Cash ISAs and savings accounts.

It now has the market-leading fixed rate Cash ISA and savings bond, which both pay 3.05%.

The accounts also have versions which allow savers 25% access, though the rates on these drop to 2.90%.

Market-leading accounts

Leeds launched four new savings accounts at the beginning of September.

In response Skipton Building Society upped the rate on its online Five-Year Fixed-Rate ISA to 3% to take the joint market-leading spot. This account can be opened with £500, compared to that from Leeds which only requires £1. And the Skipton deal is only available online.

To ensure it remained the best account around Leeds BS, quickly pushed up the rates on all four of its new savings accounts.

Pricing war

Interest rates in the savings markets have been plummeting for the past year, leaving savers with very few decent options. That's why the recent burst of activity is so positive, as there are now a few more places for savers to earn some interest.

It also means there are now four accounts beating the current rate of inflation at 2.7%. While this is extremely limited compared to a year ago, it could be a sign that things are changing.

The top Cash ISAs

When looking at the Cash ISAs, the two Leeds accounts now take first and third place. Here you can see the current top five.

The top five bonds

Leeds BS also dominates the standard savings account market, taking first and fifth place.

There is one other fixed rate account which offers a higher interest rate - the Online Limited Edition Seven-Year Bond from Skipton BS at 3.50%. But this account is pretty inflexible as it requires savers to lock up their cash for a hefty seven years.

Here I’ve listed the top five accounts in the five-year fixed-rate range.

Long-term savings accounts

The rate increases from Leeds BS is a positive step, but it still leaves savers with a dilemna. Is it better to open up one of the current market-leading accounts or wait in the hope similar accounts will be launched with a shorter fixed-rate period?

Although 3.05% is the current market-leader, it's unlikely this will be the case in five, or even three years', time. Therefore locking into this rate will mean you're stuck with it for five years and not able to benefit from new launches.

The Government's Funding for Lending Scheme is the reason for the dire state of the savings market and this is expected to remain until at least 2015. After then it could be scaled down, which would leave banks and building societies without access to cheap loans. At this point rates should increase, but nothing's guaranteed.

If you're looking for a home for your savings right now, the Leeds BS deals are attractive. But keep in mind that interest rates will go up at some point and if you want to be in a position then to benefit from the higher rates a shorter-term fixed-rate account is a better option.

More on savings:

The best fixed-rate savings bond rates

Why some current accounts are better than savings accounts

What next for inflation and interest rates?

The best instant-access savings rates

Save to buy: the savings accounts that help you build a deposit