4th August 2015
Competition from challenger banks is driving increases to rates for savers, who have been hit hard over recent years by Government initiatives to offer cheap funding to banks.
Moneyfacts.co.uk, the price comparison website, reveals that the savings market is once again showing signs of life after rates have been in the doldrums for several years since the Funding for Lending Scheme was introduced.
|Average one-year fixed rate bond||1.58%||1.41%||1.47%|
|Best one-year fixed rate bond||2.05%||2.01%||2.06%|
|Source: Moneyfacts.co.uk||Compiled: 4.8.15|
Charlotte Nelson, finance expert at Moneyfacts.co.uk, says: “It’s great news that we are finally seeing a rate movement that will make savers smile. The increase of the one-year fixed rate bond average from 1.41% a year ago to 1.47% today is very positive and is the first time in a long while that we have seen rates increase for two consecutive months.
“July finally seems to have seen the end of the rate-cutting trend, with more providers increasing rates on their one-year fixed rate bonds than decreasing them.”
“This is due to fierce competition between challenger banks, which are trying to dominate this sector. As many of these brands are unknown, they have little to compete on apart from price, causing many of them to constantly fight for a market-leading position. In fact, all of the top five one-year fixed rate bonds on the market today are from non-mainstream banks.
Nelson says that with a base rate rise looming, savers will be reluctant to tie up their money for longer than a year, so a one-year fixed rate bond could be the perfect option for those who don’t want to miss out on the opportunity to secure better rates in the future.
She adds: “The competition between these challenger banks will hopefully continue, keeping rates rising and spurring the main banks into offering better returns. However, savers know all too well that rates can fall just as quickly as they rise, so they shouldn’t wait too long to secure a great one-year fixed rate deal.”