Savers should look beyond the big banks for the best rates
In particular, it said local building societies reward regular savers with attractive rates. Kent Reliance, formerly a building society, currently offers the highest paying open-ended regular savings account (headline rate 3.0%) while Ipswich Building Society (headline rate 2.85%), Swansea Building Society (headline rate 2.50%) and Mansfield Building Society (headline rate 2.35%) also came out near the top. These regular savings accounts are open to those living in certain postcodes.
Savers in longer-term fixed accounts should consider challenger and international banks, said the research group. For a four-year fixed term account, Masthaven Bank currently pays 2.23%, while PCF Bank pays 2.1%. Swedish provider, Ikano Bank, which was established by the founder of Swedish furnishings giant IKEA, is offering an attractive four-year fixed term account (headline rate 2.21%). For five-year terms, PCF Bank (2.42%), Close Brothers (2.4%) and Paragon (2.4%) lead the market.
The group found that high street giants can offer competitive rates, but are typically only available to customers with current accounts, and with rates limited to one year only. First Direct, HSBC and M&S Bank, Nationwide and Santander all offer headline rates of 5%, but only for existing customers, with relatively low regular amounts saved (£200-£300 per month) and this is only for a one-year fixed term.
Brian Brown, head of insight at Defaqto, said: “When looking for a safe home for our savings, it’s tempting to opt for a bigger, well-known high street financial institution with a name that we are familiar with. However, as Defaqto’s data shows, bigger doesn’t always mean better. Some of the best rates currently on the market are being offered by small, local building societies and the newcomers on the scene, challenger banks.
“Just as taste tests have shown that supermarket beans are not only as delicious (if not better) than their branded rivals, they are cheaper and offer much better value for money for shoppers. We believe the same can often be said about savings accounts. Those savers willing to look beyond the high street and try a smaller or newer provider could discover a savings account with a more competitive rate.”