Now the top savings account has been pulled, where else can you earn interest?
Leeds Building Society has withdrawn its market-leading fixed-term savings account paying 4%.
The account offered a fixed rate for the mammoth term of 10 years. It was only launched three weeks ago, but had a significant take up among savers desperate for a return on their cash despite its lengthy duration.
Long-term savings accounts
Savers have had a tough year with rates plummeting across the board and very few attractive savings accounts coming onto the market.
Recently several providers have launched long-term fixed-rate accounts, those which last for five, seven and even 10 years. While you get a better rate, you do have to put up with your cash being locked away for longer.
The account from Leeds BS is an example of this, but the lengthy term evidently didn't put people off as the building society was forced to extend the original amount it had set aside for the bond as a result of its popularity.
Kim Rebecchi, Leeds BS spokesperson, said: “Clearly, we have seen that there is demand for the right longer-term savings product and we will look at the potential for developing other inflation-beating products that provide the peace of mind associated with the capital guarantee.”
Now the account has been pulled, the next best rate comes from Secure Trust with its seven-year account at 3.52%. Skipton and First Save also have seven-year accounts at the slightly lower rate of 3.50%.
If you don't want to fix for that long, the table below covers the best rates available on five-year fixed rate bonds.
|
Account |
Term |
Interest rate (AER) |
Minimum deposit |
Access |
| Shawbrook Bank Five-Year Fixed Rate Bond | Five years | 3.20% | £5,000 | Post, phone |
|
Five years |
3.16% |
£1,000 |
Online |
|
|
Five years |
3.15% |
£1,000 |
Online, post, phone |
|
|
FirstSave Fixed Rate Bond |
Five years |
3.15% |
£1,000 |
Online |
|
Shawbrook Bank Fixed Rate Bond |
Five years |
3.10% |
£5,000 |
Online, post |
|
Tesco Bank Fixed Term Bond |
Five years |
3.05% |
£2,000 |
Online, post |
Compare savings accounts with lovemoney.com
Changes to five-year bonds
Over the last few weeks the rates on five-year bonds have been slowly shifting upwards, which could be a reaction to the Government’s recent change to the Funding for Lending Scheme (FLS).
The scheme was created to give lenders cheap access to loans, which in turn were passed on to borrowers. But this also meant the lenders no longer needed to rely on savers' deposits to fund their loans, leading to interest rates on savings accounts plummeting.
[SPOTLIGHT]The news that FLS will be redirected towards small businesses from January 2014 is interesting as it could see the start of a rise in interest rates. Since the announcement there has been a rise in activity in the five-year fixed-rate savings market, but little movement elsewhere.
How long should you fix for?
Interest rates will rise and when they do, so will savings rates. There is speculation that interest rates could rise in 2015 which is only two years away. Being locked into an account paying 3% may prove a costly move if interest rates move quickly, as it’s not going to be the most competitive account in a couple of years, let alone in seven or ten years.
Only time will tell.
Read What next for inflation and interest rates?
Alternative ways to get a return on your money
Shorter-term accounts, such as those which last 18-months, pay around the 2% mark with GE Capital Direct and Tesco Bank both paying 2.05% on accounts of this length. Not exactly inspiring stuff.
Opening a current account which pays interest is a potential alternative. Santander and Nationwide both pay interest on in-credit balances and this could be a worthwhile short-term fix until rates begin to rise.
Peer-to-peer lending is another alternative with average interest rates which are much higher than those the high street providers are promoting.There is more risk involved though. For more read What is peer-to-peer (P2P) lending?