Big high street bank hikes interest rates – are you better off switching accounts?
A BIG high street bank has hiked the interest rates offered on several savings accounts today.
Barclays has increased rates on some of its fixed-rate bonds and cash ISAs by up to one percentage point.
It comes after the Bank of England raised the base rate from 5% in June to 5.25% in August.
And savers at high street banks are finally getting access to returns that beat the Bank's base rate.
Just weeks ago, the best savings rates were usually reserved for customers who opened accounts with online or app-only challenger banks.
But high street banks have been facing increased pressure from MPs to raise interest rates for savers in an effort to curb inflation
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Chancellor Jeremy Hunt hit out at finance chiefs for taking too long to pass on interest rate hikes to savers.
However, high street lenders seem to be getting the message and Barclays has raised the rates offered on seven of the following accounts today:
- 1 Year Fixed Rate Bond - from 4.30% to 5.30%
- 2 Year Flexible Bond - from 4.40% to 5.35%
- 1 Year Flexible Cash ISA - from 4.30% to 5.30%
- 2 Year Flexible Cash ISA - from 4.40% to 5.35%
- Premier 2 Year Flexible Bond - from 4.50% to 5.50%
- Premier 1 Year Flexible Cash ISA - from 4.40% to 5.45%
- Premier 2 Year Flexible Cash ISA - from 4.50% to 5.50%
Fixed and flexible rate bonds usually require savers to lock away their savings.
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These offer some of the highest interest rates - but this usually comes at the cost of being unable to withdraw your cash within the agreed term.
However, some banks will allow you to make a withdrawal but only under certain circumstances.
For example, Barclays' flexible bond accounts do allow customers to make a withdrawal - up to three and worth at least 10% of the initial deposit.
But if you aren't permitted to make withdrawals on a separate account - it could mean that if interest rates increase during your term you can't move your money and switch to a better account.
But Barclay's fixed accounts can still be beaten by other competitors.
Ford Money's 18 month fixed bond savings account pays savers 6.05% back on deposits between £500 and £2,000,000.
This means that if you were to save £1,000 in the fixed bond over 12 months you'd expect to gain £60.50 in interest payments.
Barclays has also upped the rates on some of its cash ISAs (Individual Savings Accounts).
These are savings accounts where you never pay tax on any interest earned.
You can put up to £20,000 into one of the accounts every tax year.
These accounts are worth it if you can work out that you'll earn enough interest on your savings to breach the personal savings allowance.
We've previously explained what this is and how to avoid it.
Again, Barclays' fixed cash ISAs don't offer market-leading rates and you could earn more back in interest by putting your savings elsewhere.
Aldermore's one-year fixed rate cash ISA pays savers 5.71% back on deposits of at least £1,000.
This means that if you were to save £1,000 in the fixed bond over 12 months you'd expect to gain £57.10 in interest payments.
How to find the best savings rates?
There's a handful of other types of savings accounts available to customers which might better suit your circumstances and each account comes with different rates.
These include easy-access accounts and regular savings accounts which allow greater flexibility when it comes to withdrawing your cash to spend on emergencies.
Of course, if you're looking for a new savings account it's always worth having a browse on price comparison websites.
Moneyfactscompare, Compare the Market, Go Compare and MoneySupermarket will help save you time and show you the best rates available.
These sites let you tailor your searches to an account type that suits you and will show which accounts have the highest rates.
It's worth checking the latest savings rates frequently as more movement in the market is predicted.
The Bank of England is expected to increase the base rate further in the coming months and this would see banks and building societies continue to battle it out to offer market-leading interest rates
Here's a list of the best savings rates we've found on a number of different accounts right now.
Easy-access savings accounts - up to 4.8%
These savings accounts do what they say on the tin - they usually allow unlimited cash withdrawals.
However, this perk means they tend to come with lower returns, but there are a number of accounts worth considering.
Tandem Bank's Instant Access Saver pays savers 5% back on their deposits thanks to a 12-month 0.35% interest boost.
The underlying annual interest rate is 4.65% but you'll be able to top it up to 5% once you've opened an account on the app and clicked the 'top-up' button.
The account also comes with no minimum deposit - so you can deposit any amount from £1 all the way up to £250,000.
So if you deposited the minimum £1,000 in the account you'll gain £50 in interest at the end of the full term.
Notice savings accounts - up to 5.59%
Notice accounts offer slightly higher rates than easy-access accounts.
But you'll need to give advance notice to your bank (up to 180 days in some cases) before you can make a withdrawal or you'll forfeit the interest.
Savers can currently get 5.59% on a 180-day notice account from Oxbury Bank.
Savers depositing £1,000 in this account can expect to gain £55.90 in interest after 12 months.
Regular savings accounts - up to 7%
These accounts generate decent returns but only on the basis that you pay in a set amount each month.
To get the best rates you'll also need to hold a current account with the providers below as these linked regular savings accounts pay the top rates.
First Direct offers a regular saver paying 7% in interest.
You'll need to save between £25 and £300 a month, and up to £3,600 a year.
For example, if you were to save £300 every month for 12 months with this account, you'll earn approximately £136.50 in interest.
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Lloyds Bank's Club Lloyds Monthly Saver will pay 6.25% interest on savings of up to £400 a month, so if you're looking to put away a little here and there it could be a good account for you.
If you deposit £400 every month for 12 months you will have a balance of £4950 after all interest is paid - but you'll need to be a Club Lloyds member to have access to this account.