Best buy 1-year savings bond pays 2.25%. Expert raves - ‘highest I've seen in NINE years’
A SAVINGS EXPERT is hailing a new best buy savings bond, which is paying the highest interest rate she has seen in nine years.
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This one-year fixed rate bond from Kent Reliance is paying 225 times more interest than today's lowest easy access savings account, Barclays Everyday Saver. Savers should consider switching if they can lock their money away for 12 months.
Anna Bowes, co-founder of savings rate tracking service Savings Champion, says that after years in the doldrums, savings rates are finally beginning to rise.
This follows four successive Bank of England base rate hikes since December, which have lifted rates from 0.1 percent to one per cent today.
Lots of smaller banks and building societies are responding by increasing their savings rates, but the big high street banks have been slow to respond.
HSBC, Lloyds and NatWest still pay just 0.1 percent on easy access, while Barclays Everyday Saver continues to pay 0.01 percent.
Incredibly, £418 billion of savers’ money continues to languish in savings accounts paying less than 0.1 percent, according to new research from Paragon Bank.
Yet Bowes has flagged up a market leading one-year-old fixed-rate bond from Kent Reliance that pays 2.25 percent.
Bowes told Express.co.uk that even though savings rates are rising, inflation is now three or four times even the best rates on the market.
“To mitigate the effects, savers need to do whatever they can to squeeze as much interest as possible from their hard-earned savings.”
Now is a great time to review the savings accounts you hold and switch if they are uncompetitive, especially if you have cash with a high street bank, she said.
“The best easy access account is the Chase Saver Account, which pays 1.50 percent on balances up to £250,000.
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“By switching to Chase you could earn £15 a year for every £1,000 deposited, as opposed to just 10p with Barclays Everyday Saver,” Bowes said.
If you don’t need access to the money, you could earn even more if you are prepared to tie it up for some time, she added.
“The best one-year bond is paying an annual equivalent rate (AER) of 2.25 percent at the moment. Incredibly, this is the highest rate I’ve seen over a 12-month term for more than nine years.”
The bond is from savings provider Kent Reliance, although only if you buy it through the Flagstone cash deposit platform. It would turn £10,000 into £10,225 over 12 months.
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Alternatively, instead of this exclusive deal, you can buy direct a one-year fixed rate bond direct from Kent Reliance, but this pays a slightly lower rate of 2.05 percent on a minimum opening deposit of £1,000. The maximum you can pay in is £1 million.
The interest rate increases to 2.35 percent if you are willing to fix for two years.
Savers now face a tough choice when deciding how long to tie up their money for.
While fixed-rate bonds pay more if you can lock your money up for three or five years, this can backfire, Bowes said. "You may kick yourself for locking in too soon if the Bank of England continues to increase base rates, as savings rates will also climb.”
It is a knife-edge decision, though. “All the time you are waiting until the next best rate comes along, you will be earning less where you are in the meantime," Bowes added.
In practice, five-year bonds don't pay much more than one or two-year bonds. RCI Bank pays a market-leading 2.45 percent a year fixed for five years, but this is only slightly more than the Kent Reliance two-year rate.
However, United Trust Bank does pay a more generous 2.80 percent a year for five years.
The best all-round response may be to split your savings between a number of accounts.
