No one can deny that it’s been a rough ride for savers over the past few years. And it’s rare that there’s anything positive to say about savings accounts.
However, today, for a change, there is a snippet of good news.
That’s because interest rates on savings accounts are starting to improve – and in some cases, average rates are now at their highest levels since base rate dropped to 0.5% in March 2009.
So let’s take a closer look.
Easy access and ISAs
The table below highlights how the average interest rate has changed since March 2009 for both easy access savings accounts and cash ISAs.
|
Date (1st month) |
Average easy access (no notice) rate |
Average cash ISA rate |
|
March 2009 |
0.83% |
1.99% |
|
April 2009 |
0.65% |
1.92% |
|
May 2009 |
0.64% |
1.92% |
|
June 2009 |
0.67% |
1.92% |
|
July 2009 |
0.73% |
1.92% |
|
August 2009 |
0.75% |
1.95% |
|
September 2009 |
0.77% |
2.02% |
|
October 2009 |
0.79% |
2.02% |
|
November 2009 |
0.81% |
2.11% |
|
December 2009 |
0.81% |
2.06% |
|
January 2010 |
0.78% |
2.05% |
|
February 2010 |
0.76% |
2.12% |
|
March 2010 |
0.72% |
2.09% |
|
April 2010 |
0.72% |
2.14% |
|
May 2010 |
0.73% |
2.12% |
|
June 2010 |
0.73% |
2.12% |
|
July 2010 |
0.73% |
2.08% |
|
August 2010 |
0.74% |
2.07% |
|
September 2010 |
0.77% |
2.07% |
|
October 2010 |
0.78% |
2.16% |
|
November 2010 |
0.79% |
2.15% |
|
December 2010 |
0.80% |
2.20% |
|
January 2011 |
0.83% |
2.27% |
|
February 2011 |
0.84% |
2.27% |
|
March 2011 |
0.84% |
2.39% |
|
April 2011 |
0.84% |
2.49% |
|
May 2011 |
0.88% |
2.61% |
|
June 2011 |
0.89% |
2.54% |
Source: Moneyfacts
As you can see, the average interest rate on easy access savings accounts plummeted to a paltry 0.64% in May 2009. However, since then, rates have been steadily increasing (with a few dips inbetween), with June 2011 witnessing the highest average rate in more than two years – at 0.89%.
Now admittedly these rates aren’t anything like the rates we saw at the end of 2008, when the average easy access savings rate was 4.24%. In comparison, an average rate of 0.89% looks absolutely pitiful. But if we can draw anything positive from this, it’s that interest rates are finally going the right way for savers.
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See the guideIt’s a similar picture for cash ISAs. Having dropped to an average of 1.92% back in April 2009, interest rates are slowly recovering, and now you’re looking at an average rate of 2.54%. And, of course, the massive advantage of a cash ISA is that your savings are tax-free.
So we can only hope that interest rates on savings accounts continue to go up.
Fixed rate bonds
But what about fixed rate bonds? How have interest rates fared on these little beauties?
|
Date |
1 year bond |
2 year bond |
3 year bond |
4 year bond |
5 year bond |
|
March 2009 |
2.78% |
2.83% |
2.98% |
2.89% |
2.86% |
|
April 2009 |
2.79% |
2.97% |
3.13% |
3.25% |
3.08% |
|
May 2009 |
2.86% |
3.12% |
3.30% |
3.39% |
3.36% |
|
June 2009 |
3.04% |
3.40% |
3.48% |
3.57% |
3.77% |
|
July 2009 |
2.98% |
3.34% |
3.52% |
3.72% |
3.74% |
|
August 2009 |
3.15% |
3.64% |
3.84% |
4.12% |
4.38% |
|
September 2009 |
3.22% |
3.74% |
4.05% |
4.18% |
4.64% |
|
October 2009 |
3.23% |
3.75% |
4.08% |
4.19% |
4.77% |
|
November 2009 |
3.18% |
3.75% |
4.16% |
4.26% |
4.77% |
|
December 2009 |
3.12% |
3.73% |
4.41% |
4.30% |
4.69% |
|
January 2010 |
3.07% |
3.72% |
4.05% |
3.99% |
4.56% |
|
February 2010 |
2.97% |
3.67% |
3.91% |
4.18% |
4.60% |
|
March 2010 |
2.88% |
3.51% |
3.86% |
3.85% |
4.55% |
|
April 2010 |
2.83% |
3.40% |
3.72% |
3.98% |
4.37% |
|
May 2010 |
2.72% |
3.30% |
3.63% |
4.03% |
4.35% |
|
June 2010 |
2.64% |
3.19% |
3.53% |
4.07% |
4.27% |
|
July 2010 |
2.62% |
3.16% |
3.52% |
4.02% |
4.12% |
|
August 2010 |
2.52% |
3.13% |
3.50% |
4.05% |
4.02% |
|
September 2010 |
2.59% |
3.19% |
3.52% |
4.01% |
4.10% |
|
October 2010 |
2.62% |
3.22% |
3.51% |
4.01% |
4.10% |
|
November 2010 |
2.62% |
3.18% |
3.46% |
3.73% |
3.99% |
|
December 2010 |
2.66% |
3.19% |
3.45% |
3.74% |
3.92% |
|
January 2011 |
2.61% |
3.17% |
3.59% |
3.74% |
4.06% |
|
February 2011 |
2.63% |
3.20% |
3.59% |
3.85% |
4.01% |
|
March 2011 |
2.66% |
3.27% |
3.60% |
3.91% |
4.00% |
|
April 2011 |
2.82% |
3.41% |
3.71% |
4.01% |
4.17% |
|
May 2011 |
2.94% |
3.52% |
3.70% |
4.01% |
4.34% |
|
June 2011 |
2.93% |
3.49% |
3.72% |
3.98% |
4.32% |
Source: Moneyfacts
Sadly, the same can’t quite be said for fixed rate bonds where average rates dropped following the fall in base rate, then picked up again towards the end of 2009, only to slip back down again. That said, although average rates aren't at their highest level in two years, they are certainly a lot better than they were in March 2009 and also, in most cases, look healthier compared to a year ago.
The top accounts
So now we’ve looked at the average interest rate on savings accounts, where will you find the very best rates? Below, I’ve highlighted some of the top paying savings accounts in various categories.
Best for easy access
|
Provider and account |
Interest rate (AER) |
Minimum deposit |
Need to know |
|
3.10% |
£1 |
Rate includes 1.10% bonus for 12 months. Four penalty-free withdrawals permitted per year. |
|
|
3.05% |
£1,000 |
Rate includes 1.51% bonus for 12 months. One penalty-free withdrawal per year. |
|
|
3% |
£1 |
Rate includes 2.46% bonus for 12 months. |
|
|
3% |
£1 |
Rate includes 2.50% bonus for 12 months. |
|
|
3% |
£1 |
Rate includes 2.55% bonus for 12 months. |
Bear in mind that as all of these accounts include a bonus rate for 12 months, you’ll need to review your savings after a year and move your money to a more competitive account if necessary.
Best for cash ISAs
Right now, the top paying easy access cash ISA is the AA Internet Access ISA which pays an interest rate of 3.35%. This includes a bonus of 1.65% for 12 months and you’ll need a minimum deposit of £500.
With ISA season in full swing. John Fitzsimons looks at what you should consider before going for your first account
If you don't mind tying your funds up for a while, the best one year fixed rate cash ISA you’ll find is the Aldermore 1 Year Fixed Rate ISA which pays 3.33% and you’ll need a deposit of at least £1,000. Of course, this rate is actually lower than the AA Internet Access ISA, but the rate is at least fixed for the 12 month period. However, bear in mind you can’t access your funds during this time.
If you’re prepared to tie up your funds for two years, the Bank of Cyprus Fixed Rate Cash ISA pays 3.7% interest, with a £1 deposit. And if you’re after a three year account, the Bank of Cyprus Fixed Rate Cash ISA pays 4.25% – again with a deposit of at least £1.
For a four year fixed rate ISA, your best bet is the Halifax Fixed Rate ISA Saver, paying 4.4% (minimum deposit of £500), and for five years, take a look at the BM Savings 5 Year Fixed Rate ISA paying 5% (minimum deposit of £500).
Fixed rate bonds
Finally, here’s a quick rundown of the best fixed rate bonds in the market.
|
Provider and account |
Interest rate (AER) |
Term |
Minimum deposit |
|
3.50% |
1 year |
£1,000 |
|
|
4% |
2 years |
£500 |
|
|
4.3% |
3 years |
£1,000 |
|
|
4.4% |
4 years |
£1,000 |
|
|
5.05% |
5 years |
£1 |
Personally, I would avoid locking up my money for four or five years as interest rates are likely to rise in the near future, meaning that what had been a competitive account when you opened it, may not be a year or two later.
But overall, if you are earning a rubbish interest rate on your savings, now might be the time to look for a new savings account!
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