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Savers urged to switch accounts as rates improve

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Written by: Emma Lunn
14/09/2022
Savers can achieve much better interest rates on their savings compared to last year, but it is still impossible to find an account that can outplace inflation.

The Consumer Price Index (CPI) fell to 9.9% during August, from 10.1% in July. But Moneyfacts calculated that there isn’t a single standard savings account that can outpace this inflation rate.

It was a similar story last year. In September 2021, there were no deals that could beat 3.2% (August 2021 CPI). However, the previous year, in September 2020, there were 661 savings accounts that could beat 0.2% (August 2020 CPI).

The top easy access savings account currently on offer is from Al Rayan Bank and pays 2.1%, while the top 90-day notice account is offered by BLME and pays 2.5%.

BLME also offers the best buy one-year fixed rate bond at 3.4%. For longer-term fixes, Close Brothers has a best buy two-year bond at 3.55%, and Smart Save tops the table for three-year bonds at 3.61%. BLME has best buys for four and five-year bonds at 3.6% and 3.75% respectively.

‘Top rates are from challenger banks’

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Savers’ cash is still being eroded in real terms due to the current level of inflation, but this should not deter consumers from reviewing their existing rate and being proactive to switch.

“Since the last inflation announcement, top rates have continued to improve and savers who are looking at one-year fixed bonds will find they can now earn more than 3%. Challenger banks have made a positive impact on the top rate tables, but due to continued competition, savers will need to keep on top of the ever-changing market to take advantage.

“The back-to-back Bank of England base rate rises since December 2021 have had a positive impact on the easy access market, but the top rates on offer are from challenger banks. Savers who have yet to review their accounts would be wise to do so, as they can now earn a much higher rate than what could have been achieved a few months ago. However, some savers may not have seen the benefits of every base rate rise on their existing account, so reviewing and switching is essential.”

Springall described the one-year fixed rate bond as “flourishing”, with the top one-year fixed bond now paying 1.90% more than a year ago (1.50% versus 3.40%).

Fixed ISA rates have also improved, but the top rates are still lower than the top fixed bond rates, so it’s essential savers consider their ISA allowance and their Personal Savings Allowance when they invest.

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