Challenger banks continue to beat the High Street names when it comes to savings rates

9th June 2015

img founder and Mindful Money columnist Anna Bowes takes a look at where the top savings deals are to be found right now… 

Charter Savings Bank has launched a new version of its 1 Year Fixed Rate Bond paying 1.91%, replacing the previous version, which paid 1.75%. Accounts can be opened online with a minimum of £1,000 and you cannot access your funds within the term.

The latest assault on the best buy tables by this provider, sitting in second place in the 1 year fixed rate bond table after Punjab National Bank (2%), marginally beating the next best rate of 1.90% from United Trust Bank and Aldermore.

This provider has launched a number of best buys since its launch in March this year and this kind of challenge to the established order of savings providers should be encouraged. As we have seen time and again, it is the challenger banks, like Charter Savings Bank providing the competition in the savings market, without whom the situation would be far worse for savers.

Shawbrook Bank has launched higher paying versions of its 1, 2 and 3 year fixed rate cash ISAs. The 1 Year Fixed Rate Cash ISA Bond Issue 6 pays 1.65% (the previous version was 1.60%), the 2 Year Fixed Rate Cash ISA Bond Issue 7 pays 1.80% (the previous version was 1.75%) and the 3 Year Fixed Rate Cash ISA Bond Issue 3 pays 2.00% (the previous version was 1.95%).

It is encouraging to see a provider make improvements to its fixed rate ISAs outside of the traditional ISA season and this may give hope to those who have yet to find a suitable home for this tax year’s ISA allowance. The new rates are competitive, with the 1 year ISA paying a market leading rate, the 3 year ISA beaten only by the State Bank of India (2.10%) and the two year ISA sitting comfortably in the top five ISAs for the term.

Having previously been mainly known for its competitive fixed rate bonds and notice accounts, it is good to see this provider making waves in the cash ISA market, having only started offering them this year. Many of the challenger banks do not currently compete in this area of the savings market, but hopefully Shawbrook’s success will encourage others to follow.

Skipton Building Society has withdrawn its range of fixed rate ISAs and replaced them with new versions.

The 1 Year Fixed Rate Cash ISA was paying 1.62% and the new version pays 1.40%. The 2 Year Fixed Rate Cash ISA has also reduced, paying 1.70%, having previously paid 1.80%. The 3 and 5 Year Fixed Rate Cash ISAs have both gone up, now paying 2.00% and 2.30%, having previously paid 1.95% and 2.10% respectively.

A definite mixed bag here, with disappointing reductions for the shorter terms, but better news for the longer term ISAs. The 1 and 2 year fixed rate ISAs were both competitive before the change, indeed the 1 year ISA was market leading until the launch of Shawbrook’s new table topper, but now have dropped out of the running. Both the 3 and 5 year ISAs sit comfortably in the top five of the respective terms, beaten only by the State Bank of India (2.10% for 3 years and 2.30% for 5 years). So whilst it is not all good news, the longer term ISA improvements are certainly a welcome sight, given that we are outside of the ISA season.

However, as we have sadly got used to in today’s savings market, there is plenty of less positive news, as providers continue to reduce the rates on offer.

State Bank of India has withdrawn its 1000 Days Cash ISA Fixed Deposit paying 2.30%. A new 3 Year Cash ISA Fixed Deposit has been launched paying 2.10%, which is the highest paying 3 year fixed rate ISA on the market.

On the one hand, it extremely disappointing to see a market leading rate disappear, at least the replacement is a top rate, so the provider is still maintaining a healthy position in the best buy tables.

Santander has withdrawn its 2 Year Fixed Rate Cash ISAs, replacing them with new versions paying lower interest rates. The 2 Year Fixed Rate ISA, exclusive to 123 account holders, was paying 1.65%, the new version is 1.50%. The 2 Year Fixed Rate ISA, open to everyone, was paying 1.40% and the new version is 1.25%.

So, yet again we see a high street name taking uncompetitive rates and making them even worse. More proof, if it were needed that savers need to move away from the high street and the big names and look at some of the challenger banks and lesser-known names, who are providing many of the competitive rates on the market at the moment.

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