Savers can benefit from rising interest rates
Savers who are looking for the best returns on their money are advised to act fast and take advantage of the rising interest rates offered by some banks. According to experts, interest rates have been on the rise over the past year thanks to central banks raising their base rates and inflation expectations. This means that savers can now find savings accounts that offer interest rates above 5%, which is much higher than the average inflation rate of 3.1%.
However, not all banks are passing on the interest rate hikes to their customers, and some are still offering unjustifiably low rates. The UK’s financial watchdog, the Financial Conduct Authority (FCA), has warned that it will take “robust action” against banks that fail to treat their customers fairly and offer competitive rates. The FCA has also urged savers to shop around and compare different savings products to find the best deal for their needs.
Banks offering 5.71% interest rate on savings accounts
One of the banks that is offering a high interest rate on savings accounts is NS&I, the government-backed savings provider. NS&I has recently launched its three-year green bonds, which pay an annual interest rate of 5.71% and are designed to support environmental projects. The bonds have a minimum investment of £100 and a maximum of £100,000, and are available until March 2024 or until they are fully subscribed.
Another bank that is offering a competitive interest rate on savings accounts is Metro Bank, which has increased the rate on its Instant Access Savings account to 5.22%, including a 3.46% bonus for the first 12 months. The account can be opened online or in a branch, and to get the bonus, savers must pay in at least £500 within 28 days.
Other options for savers
Besides savings accounts, savers can also consider other options to get a higher return on their money, such as fixed-term deposits, cash ISAs, or peer-to-peer lending. However, these options may have different risks, fees, and tax implications, so savers should do their research and understand the terms and conditions before investing.
Fixed-term deposits are savings accounts that lock in the money for a set period of time, usually between one and five years, and pay a fixed interest rate. The advantage of fixed-term deposits is that they offer a guaranteed return and protection from interest rate fluctuations. The disadvantage is that they do not allow early withdrawals or additions, and may charge penalties for breaking the term.
Cash ISAs are savings accounts that offer tax-free interest up to a certain limit, which is £20,000 for the 2023/24 tax year. The advantage of cash ISAs is that they can help savers save on tax and build up a tax-free savings pot. The disadvantage is that they may offer lower interest rates than other savings accounts, and may have restrictions on withdrawals or transfers.
Peer-to-peer lending is a form of online lending that connects savers with borrowers, who are usually individuals or small businesses. The advantage of peer-to-peer lending is that it can offer higher interest rates than traditional savings accounts, and can diversify the savers’ portfolio. The disadvantage is that it is not covered by the Financial Services Compensation Scheme (FSCS), which protects up to £85,000 of savers’ money if the bank or provider fails, and may have higher risks of default or fraud.
Savers who want to get the best interest rates on their money should act quickly and chase the best deals available on the market. Interest rates are on the rise, but not all banks are passing on the benefits to their customers. Savers should compare different savings products and consider their risks, fees, and tax implications before investing.
