Weekly savings update: HSBC launches new ISA as Charter Savings Bank enters market

2nd March 2015

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Savingschampion.co.uk founder and Mindful Money columnist Anna Bowes looks at what deals are hitting the marketplace and whether they are worth your attention…

Charter Savings Bank has entered the savings market with the launch of a range of variable and fixed rate savings accounts. The new challenger bank has launched an easy access account paying 1.25% and a 95 Day Notice Account paying 1.75%. The provider’s fixed rates are 1.80% for 1 year, 1.90% for 2 years, 2% for 3 years, 2.10% for 4 years and 2.50% for 5 years. Accounts can be opened online with a minimum of £1,000, up to a maximum of £250,000.

New faces to the savings market are always a welcome sight, particularly if they can encourage more competition by challenging the current best buys. The easy access account sits just below the top 5 best buys on the market at the moment. The notice account is the most impressive of the new deals, as it matches the rate of the market leading account from Shawbrook Bank, although it has a shorter notice period requirement.

The one year bond is also competitive, sitting next in line after the Punjab National Bank (2%). The longer term bonds are less competitive, with higher paying alternative options for each of the terms. Hopefully some of the more established providers will take on the challenge and react to this new kid on the block.

HSBC has launched an exclusive cash offer for its Advance current account holders. Advance customers who pay in at least £25 per month into their Loyalty Cash ISA (1.49% tax free/1.50% AER) will receive an extra £10 a month for 12 months, on top of the interest they receive on the ISA. To be eligible for the current account, you must pay in at least £1,750 each month.

This is a fantastic deal for those who already have an Advance current account, with the cash incentive plus interest leading to a significant overall return over the year. This type of incentive is bound to be attractive to other savers who are looking to maximise their overall return and who may be prepared to switch their current account in order to qualify. For these savers, the offer is attractive, but there are alternatives out there.

For example, arguably a better option could be to switch to a Halifax Reward Current Account and receive £125 for switching plus £5 for each month that you pay in at least £750; a total of £185 for the year. You could then open an easy access ISA with the Post Office at 1.50% to receive the same level of interest on the ISA as the HSBC Loyalty Cash ISA is paying. So the offer is possibly not as good as it first appears for those prepared to switch current account to take advantage. Of course it is also important to check which current account will be the most appropriate.

Shawbrook Bank has launched new versions of its 120 Day Notice ISA and 2 year fixed rate ISA at higher rates. The 120 day notice ISA is now paying 1.55% (the previous issue was 1.45%) and the 2 year fixed rate ISA is paying 1.95% (the previous issue was 1.75%). Both ISAs accept transfers in. The 120 day notice ISA can be opened with a minimum of £1,000 and withdrawals are allowed, without giving the full notice period, subject to a penalty equivalent to 120 days interest.  The 2 year fixed rate ISA can be opened with a minimum of £5,000 and withdrawals or transfers out can be made prior to maturity, subject to a penalty equivalent to 180 days loss of interest.

It is encouraging to see Shawbrook improving the rates on offer so soon after launching its first ISAs. The notice ISA is now in the top 5 for variable rate ISAs, although it still lags behind Hinckley & Rugby Building Society (1.60% with 120 days’ notice). The 2 year fixed rate ISA matches the Post Office, which at the moment is the highest paying 2 year fixed rate ISA on the market that is widely available. Hopefully as we get closer to the end of the tax year, we will see more providers improving the ISAs on offer and pushing the rates up even higher.

State Bank of India has launched a 1000 Day fixed rate ISA paying 2.30% and a 5 Year Fixed Rate ISA paying 2.50%, these both now feature in our Fixed Rate ISA Best Buy Table.

It is great to see these best buy fixed rate ISAs and hopefully we will see even more in the coming days and weeks. The 1000 day fixed rate ISA is significantly higher than the top 3 year fixed rate ISA from the Post Office (2.10%). The 5 year fixed rate ISA is beaten only by United Trust Bank (2.75%), although the latter only accepts transfers in, with no new ISA money allowed.

Yorkshire Bank and Clydesdale Bank have launched a new Cash ISA – Fixed Rate Bond Issue 27, paying 2.10% until 28th April 2017.

Another good rate for a fixed rate ISA and although the term is slightly longer than 2 years, the rate is much higher than the best of the 2 year deals (Post Office 1.95%). The catch is that the ISA can only be opened in the two banks’ branches, so not everyone will be able to take advantage.

Whilst we have seen positive ISA activity among some providers, we have also seen three building societies withdraw some of their ISA deals. Bath Building Society has withdrawn its Cash ISA paying 1.45%. Furness Building Society has withdrawn its Cash ISA 90 (Issue 2) paying up to 1.60%, which was previously in our best buy table. National Counties Building Society has withdrawn its 13th Issue Fixed Rate Cash NISA paying 1.51%.

So less positive news and whilst this type of move is common in the savings market at the moment, it is not what you would expect as we enter the ISA season.

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