6th June 2014
Savers who are happy to lock their money up for 18 months can take advantage of Leeds Building Society’s market-leading bond, paying 2%.
The savings bond is available in branch, online and over the telephone to those with a minimum of £1,000 to save. Up to £250,000 can be saved but withdrawals are not permitted within the 18 month timeframe so savers have to be sure they do not need access to the money.
How to build an efficient portfolio using ETFs: Click here to find out more about Mindful Money’s live webcast on Thursday, 12 June.
‘With a market-leading rate, our new bond is sure to be popular with savers, said Jaedon Green, Leeds Building Society products general manager. ‘The 18-month term gives investors more choice if they’re seeking a competitive return but don’t want to lock away their cash for longer. It’s a good compromise between the more usual fixed rate bond terms of one and two years.’
Those who want to earn a higher rate on their savings will have to lock it away for longer. According to Savings Champion, Vanquis Bank is offering a five year bond with a rate of 3.02% and Britannia is offering a three year bond paying 2.28%.
Kent Reliance is top of the leader board for both one and two-year bonds, paying 1.88% and 2.23% respectively.
But if you need easier access to your money, Julian Hodge Bank has a 90-day notice account but it pays 1.69%, below the current inflation rate of 1.8%.
Savers should remember that interest made on savings bonds is subject to income tax so it is worth maxing out your individual savings account (ISA) limit – which increases to £15,000 on 1July – before putting money into savings bonds as interest made in ISAs rolls up tax-free.
Decent savings rates have been difficult to come by and the blame has been laid squarely at the foot of the government’s Funding for Lending Scheme (FLS). Under FLS politicians made £80 billion available to banks and building societies at a cheap interest rate on the condition that lenders loaned the money out as mortgages and small businesses loans.
The property market received a huge boost from FLS – businesses less so – but it also meant lenders no longer had to rely on savers’ deposits to fund lending and consequently savings rates slumped.
FLS was stopped for mortgages in November last year, although it has continued for business lending, and subsequently savings rates have started to inch up.
Register here for Neil Woodford updates and receive a free research report.