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Challenger bank goes against the grain by increasing savings interest rate

Paloma Kubiak
Written By:
Paloma Kubiak

Ikano Bank has increased the interest rate offering on one of its fixed savings products, placing it in joint first position in the best buy tables.

The Swedish challenger bank today increased the interest rate paid on its Fixed 1 Year Saver from 1.35% AER to 1.40% AER.

This move takes Ikano Bank’s one-year fixed rate offering to top joint place in the best-buy tables of comparable products, above Charter Savings Bank’s 1.38% AER one-year fixed bond, and alongside Atom Bank’s 1.40% AER one-year fixed deal.

The account can be opened online and it’s available to new customers only looking to save between £1,000 and £1m.

No time-frame has been set out for how long the product will be available for as Ikano said it’s constantly reviewing products in line with the market.

Ikano Bank, founded by the family behind Ikea, confirms that all other rates being offered remain the same.

Simon Ripton, head of UK banking at Ikano Bank, said: “We’re committed to providing customers with consistently great rates. We’re able to do this because we do things simply – our savings products are both straightforward and online. Low costs and simplicity help us offer customers great deals.”

Andrew Hagger of Moneycomms thinks the rate increase was made to “improve Ikano Bank’s position in the best buy tables”.

“It’s good news for savers, particularly if this move drives a response from other providers – it’s a little too early to tell if that will be the case but it’s refreshing to see an increase in rates rather than yet another cut.”

However, he warns savers that the account is not backed by the UK Financial Services Compensation Scheme (FSCS). Instead it’s backed by the Swedish Deposit Insurance scheme up to £75,000 so €100,000 will be paid out in compensation should it go bust.

“That said, the Swedish economy is in pretty good shape,” he adds.

See’s Should I entrust foreign banks with my savings? for more information about foreign FSCS-equivalent deposit protection schemes.