Martin Lewis discusses UK regulated savings accounts
When you subscribe we will use the information you provide to send you these newsletters. Sometimes they’ll include recommendations for other related newsletters or services we offer. Our Privacy Notice explains more about how we use your data, and your rights. You can unsubscribe at any time.
Savings accounts are used by millions of people in the hopes of growing their cash, but it has been a difficult situation recently. With the impacts of the pandemic palpably felt, many banks have slashed their interest rates over the past year, in efforts to encourage spending rather than saving. However, in recent weeks, the situation has been looking more favourable for savers in the UK.
At the start of the new tax year in April, the best one-year fixed rate savings account offered 0.65 percent, but now Britons can get up to 0.85 percent.
This is likely to be good news for those who are hoping to grow their savings pot, either to provide more financial stability, or to chase certain goals.
However, there are also concerns this rise could be a temporary one, leaving savers with limited time to benefit.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, commented on the matter.
She said: “The house-buying frenzy has brought fresh hope for savers.
“Banks need more cash to back their mortgage lending, so they’ve been forced to boost savings rates.
“However, there’s a risk this house-buying boom will burn itself out this summer, so the spark of hope for savers could be a flash in the pan.
“If you’re looking for a new home for your money, particularly if you want to tie it up in return for a better rate, it’s well worth acting sooner rather than later while the best deals are around.”
Santander: You may get compensation as bank apologises for ‘issue’ [UPDATE]
Pension: DWP announces ‘simpler’ way for Brits to save for retirement [ANALYSIS]
TSB: Good news for savers as bank offers one percent interest rate [INSIGHT]
At present, over one year, one of the best deals is from Atom Bank which is offering 0.85 percent.
Zopa has an interest rate of 0.9 percent over two years and 1.01 percent over three.
Whereas, Ms Coles also drew attention to Gatehouse Bank, a provider which is offering an interest rate of 1.4 percent over five years.
But why may strong savings rates only be temporary, and what will this mean for savers?
Ms Cole suggests this short-term success for rates could come to a close due to the less familiar nature of the banks currently offering top rates.
As these are smaller institutions, they will have limited capacity, and therefore their products may not be around for long.
In a similar sense, when looking at the property boom, its longevity, Ms Coles mused, cannot be taken for granted.
Various factors such as the artificial deadline for the stamp duty holiday and increased demand meant prices rose, but as the new stamp duty deadline approaches in June, this could cool the market.
When looking at the state of savings and interest rates more widely, a recent decision means there is not much optimism in the market.
This decision was the Bank of England’s choice to keep the base rate at 0.1 percent – which it has been at since March 2020.
As the central bank does not expect to raise the base rate until inflation consistently reaches two percent or above, this is not the best news for savers.
Current projections see the base rate at 0.6 percent or above in the next few years, which does not lend itself to market-wide interest rate rises being close by.
When deciding what bank is best, Britons are always encouraged to look for Financial Services Compensation Scheme (FSCS) backed providers.
This means that should the worst happen, deposits up to £85,000 will be protected, and in many cases the interest accrued on savings.
Source: Read Full Article