New account pays 1.90% AER.
Paragon Bank has launched a new one-year fixed rate savings bond paying 1.90% AER.
Paragon Bank only came on to the market in February this year, so it's a new player in the world of savings.
Let's take a look at how the new one-year bond shapes up with the rest of the market.
|
Account |
Interest rate (AER) |
Minimum deposit |
Access |
|
2.1% |
£1,000 |
Telephone, post, online |
|
| Investec Fixed Term Deposit | 1.95% | £25,000 | Post, online |
|
Paragon Bank 1 Year Fixed Rate Bond |
1.90% |
£1,000 |
Online |
| Kent Reliance Fixed Rate Bond | 1.90% | £1,000 | Post, branch, online |
| Islamic Bank of Britain Fixed Term Deposit | 1.90% | £1,000 | Post, branch, online, telephone |
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As you can see, both the Castle Trust Fortress Bond and the Investec Bond pay higher rates of interest. There are catches associated with both though. With the Castle Trust bond, your money is technically an investment, meaning you get a lower level of protection from the Financial Services Compensation Scheme. For more read EARN TOP RATES ON YOUR SAVINGS WITH CASTLE TRUST FORTRESS BONDS.
And then with the Investec deal, you'd need a minimum of £25,000 to get that extra 1.95%, meaning it's not a realistic option for many. So the Paragon bond is a very strong option all things considered.
Locking your money away
The appeal of a savings bond is that you get a better rate on your cash than if you stick it in an easy access account. But in return for that improved rate, you give up access to your cash for the term of the bond.
You have to work out for yourself how long you can manage without those savings. But you also need to consider what you think will happen with interest rates. At the moment the talk is that interest rates will rise in the next year or so, and then continue rising. As a result, locking your cash in a long-term savings bond (say five years) is a big gamble. Sure the rate might look great now, but in a couple of years it may be very uncompetitive. But your money will be trapped. That makes a one-year bond like Paragon's even more tempting. It's a good rate, and your money isn't locked away for a long time.
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