It's been a dismal time for savers, but rates are starting to improve... if you're prepared to lock your cash away.
Savings rates are starting to creep up again, at least if you’re prepared to lock your money away for a few years.
Recent research from financial data company Moneyfacts found that the average interest rate on a five-year savings account had fallen from 5.17% in 2008 to 2.28% now.
That’s a stark illustration of how hard the Bank of England’s Funding for Lending, and its cheap money for banks and building societies, has hit high street savings rates.
However, rates are now slowly starting to edge upwards. But you’ll need to lock your money away for quite a while to earn anything near an inflation-beating return.
The seven-year fix
If you are prepared to lock your money away for seven years, a big gamble in our book, then you can get a rate of 3.50% from Skipton Building Society.
Meanwhile, there’s been a mini-flurry of activity at the top of the five-year fixed rate accounts best buy table.
Secure Trust Bank has now secured top spot with a rate of 3.11%, with Leeds Building Society and Tesco Bank just behind with 3.05% apiece. Vanquis Bank has also boosted its rate by 0.15% to 2.91% – although it’s still not enough for one of the top five spots.
You’ll notice we haven’t mentioned a mainstream bank or building society yet. That’s because none of them come close to top spot.
Here are the top five-year fixed rate accounts
|
Account |
Term |
Interest rate (AER) |
Minimum deposit |
Access |
|
Secure Trust Bank Fixed-Rate Bond |
Five years |
3.11% |
£1,000 |
Online |
|
Leeds BS No Access Bond |
Five years |
3.05% |
£100 |
Online, post, phone, branch |
|
Tesco Bank Fixed-Term Bond |
Five years |
3.05% |
£2,000 |
Online, post |
|
Skipton BS Five-Year E-bond |
Five years |
3.00% |
£500 |
Online |
|
Aldermore Five-Year Fixed Rate Account |
Five years |
3.00% |
£1,000 |
Online, post, phone |
|
Vanquis Bank Five-Year High Yield |
Five years |
2.91% |
£1,000 |
Online |
Meanwhile, Aldermore has taken the top spot for four-year fixed rates with an increased rate 2.70%. Tesco has also upped its four-year rate to 2.65%.
[SPOTLIGHT]Aldermore has also jumped to the top of the best buy table for three-year accounts, as it’s now paying 2.60%. Vanquis Bank has also boosted its rate here to 2.51%.
Unfortunately there hasn’t been as much movement for the shorter-term fixes. In fact, the major move has been the withdrawal of Britannia’s market-leading one-year account paying 2.03%. Now no one-year account pays more than 2% and the top two-year account pays 2.32%.
For more of the top rates, take a look at The best fixed-rate savings bond rates.
Cash ISAs
Similarly, there hasn’t been much change of the top easy access and short-term fixed-rate Cash ISAs. However, and also in common with savings accounts, rates on longer-term fixes have been on the up, particularly over five years.
Coventry Building Society has just launched a four-year fixed rate paying a market-leading 2.75%, although you need to invest your entire annual Cash ISA limit (£5,760) to get hold of it.
Here are the top longer-term ISAs:
|
Account |
Interest rate (AER) |
Minimum deposit |
Length of fixed rate |
Notes |
|
Leeds BS Five-Year Fixed-Rate ISA |
3.05% |
£1 |
Five years (fixed until 31st October 2018) |
Transfers and new subscriptions. |
|
Skipton BS Online Five-Year Fixed-Rate ISA |
3% |
£500 |
Five years (fixed until 11th October 2018) |
Transfers and new subscriptions. |
|
Leeds BS Fixed-Rate Access ISA (with 25% access) |
2.90% |
£1 |
Five years (fixed until 2 December 2018) |
Transfers and new subscriptions. |
|
Newcastle BS Fixed Rate Options ISA |
2.90% |
£500 |
Five years (fixed until 23rd October 2018) |
Transfers and new subscriptions. |
|
Coventry BS Fixed-Rate ISA |
2.75% |
£5,760 |
Four years (fixed until 31st May 2017) |
New subscriptions only. |
|
Halifax ISA Saver Fixed |
2.60% |
£500 |
Four years |
Transfers and new subscriptions. |
|
Halifax ISA Saver Fixed |
2.50% |
£500 |
Three years |
Transfers and new subscriptions. |
|
Nationwide Four-Year Fixed-Rate ISA |
2.40% |
£1 |
Four years |
Transfers and new subscriptions. |
|
Cheshire BS Fixed Rate Cash ISA |
2.40% |
£100 |
Four years |
Transfers and new subscriptions. |
|
Derbyshire BS Fixed Rate Cash ISA |
2.40% |
£100 |
Four years (fixed until 30th November 2017) |
Transfers and new subscriptions. |
|
Dunfermline BS Fixed Rate Cash ISA |
2.40% |
£100 |
Four years (fixed until 30th November 2017) |
Transfers and new subscriptions. |
Should you go long?
Ultimately, the danger with fixing for as long as five years is rates may rise well before then (remember the Bank of England is currently forecasting late 2016), leaving you stuck on a low rate for a year or more.
For far greater returns here and now, you might instead want to take a look at either current accounts, if you want instant access, or peer-to-peer savings. With the latter, just bear in mind your money isn’t protected by the Financial Services Compensation Scheme.