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Competition between banks and building societies to attract current account holders is growing more fierce, as the best savings rate in a decade has been announced.
Nationwide Building Society is launching a linked savings account paying 8 per cent interest plus a £200 switching bonus.
According to financial information website Moneyfacts, the last time a cash regular savings account was offering a rate that high was in 2013, when a fixed-term regular saver was offered by First Direct.
The new offer from Nationwide comes as the Bank of England (BoE) decided on Thursday to freeze interest rates at 5.25 per cent for the first time in almost two years, sparing mortgage holders further pain with increased borrowing costs.
However, inflation is still much higher than the 2 per cent officials are aiming for – so as the cost of living crisis continues to bite, below we take a look at the best savings accounts on offer.
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Nationwide Building Society
Britain’s biggest building society is launching a £200 switching offer and a linked savings account paying 8 per cent interest.
Nationwide Building Society said the £200 offer was available to people using the Current Account Switch Service (Cass) and transferring a minimum of two active direct debits to the new account.
It is available to people switching to one of Nationwide’s three main current accounts – FlexPlus, FlexDirect or the FlexAccount.
It has also introduced a new Flex Regular Saver account, exclusively for current account customers, paying 8 per cent AER (annual equivalent rate) for 12 months.
After a year, the account will revert to an instant access account.
Leeds Building Society
If you are looking for the best easy-access account, then Leeds Building Society offers a top rate of 5.1 per cent, as long as the deposit is a minimum of £1,000. The account is called the Limited Issue Online Access Account and it allows for unlimited withdrawals.
When it comes to easy-access accounts, the key benefit is that you are earning interest on the money you pay in, but you can also withdraw cash whenever you need some.
The main downside to these accounts is that their rates are variable.
It must be noted that this Leeds Building Society account will mature on 1 December 2024, when you can either transfer your money to another account, or it will be moved into a maturity account, which often pay low interest rates.
RCI Bank
RCI Bank boasts a top rate of 5.6 per cent interest for its savings accounts. The account is called a 95 Day Notice Account, and it requires a minimum deposit of £1,000.
With notice accounts, you must give notice before you can take out any money, with the length of the notice period varying between different accounts.
Notice accounts offer a middle ground between instant access and fixed-term accounts where money must be locked in for long periods. If you know you will likely need your money soon although not straight away, then these accounts would be a good option.
Hampshire Trust Bank
Hampshire Trust Bank is offering a top rate of 5.6 per cent interest for a six-month account called a 6 Month Bond.
This is a fixed savings account, which prevents you from withdrawing cash until the end of the term, so you should not lock away any money that you need to easily access.
However, your interest rate is guaranteed, which can be a key upside to these accounts.
Secure Trust Bank
Secure Trust Bank has a top rate of 5.85 per cent for a savings account with a fixed term of nine months. The account is called a 9 Month Fixed Rate Bond and its deposit minimum is £1,000.
The rate is likely higher than Hampshire Trust Bank’s six-month account because the term is longer. This highlights how when choosing between fixed-term accounts, a decision must sometimes be made between better returns or quicker access to your cash.
And a downside to the longer term could come if interest rates were to rise and your money was locked in an account, preventing you from switching to a better deal.
NS&I
The top rate for one-year fixes is offered by , standing at 6.2 per cent, with the choice of two different accounts.
Its Guaranteed Growth Bond pays interest at maturity, while its Guaranteed Income Bond pays interest out of the account monthly.
The benefit of the latter is that you are receiving cash to spend every month rather than only once the bond matures at the end of the year. However, the former account ends up accumulating more interest because you are also making interest on the interest.
A significant upside to saving with NS&I is that all of your savings are protected because it is state-owned and so is backed by the Treasury. This compares to other accounts where your money is only protected up to £85,000.
