25th March 2015
Lower inflation offers savers some respite in the current record low interest rate environment writes Savingschampion.co.uk founder and Mindful Money columnist Anna Bowes…
There are many economic factors that affect inflation and it’s predicted that this dip is to be temporary but in the meantime it’s wise that savers use this opportunity to get the most from their cash and get the best rates possible.
Zero inflation or even deflation does not automatically mean a reduction in the Bank of England base rate and even if it did, there is now such a disconnect between the base rate and interest rates that can be earned on savings, that it doesn’t necessarily spell disaster. The current competition that is being stimulated by the challenger banks will hopefully continue – offering some decent interest rates paying well over base rate.
This news will be seen as of particular benefit by retired savers as a freeze on price rises alongside a real return of between 1.4% and 3%, depending on access is, after all, good news for savers.
And for those who want the certainty, rates of up to 3% guaranteed are available for savers happy to lock their money away for up to 5 years. Surprisingly, longer term fixed rates are now looking like a much more appealing option than once was thought.
This week’s best new launches
Halifax has launched a new 18 month fixed rate ISA, paying 1.60% and has replaced its 2 year fixed rate ISA paying 1.60% with a higher paying version at 1.65%.
Symptomatic of this ISA season, this change appears to be the sum total of this major savings provider’s ISA launches. The 18 month ISA is the only ISA of this term on the market at the moment, however there are better paying 1 year fixed rate ISAs from the likes of Shawbrook Bank and Julian Hodge Bank (both paying 1.65%). The 2 year fixed rate ISA is lagging some way behind the competition, with better paying ISAs available from Shawbrook Bank and the Post Office (both paying 1.95%). Savers certainly need to look elsewhere for the best possible return for their ISA funds, as the large high street providers continue to fall behind the Challenger Banks.
Skipton Building Society has made its Bonus Cash ISA Issue 4 paying 1.50% available to open and access online. Previously it was available in branch and by post only. Savers need to choose which of the two channels they want to use at account opening.
This ISA is paying a competitive rate for an easy access ISA, although it is disappointing that it does not accept transfers in from previous ISAs. This change makes the account more accessible to savers, which is a welcome move from this provider.
Raphaels Bank has launched new Fixed Rate Bonds. The 12 Month Fixed Rate Bond is paying 1.80%, the 24 Month Fixed Rate Bond is paying 2.25% and the 36 Month Fixed Rate Bond is paying 2.50%.
One of the few positive changes this week, Raphaels Bank re-enters the fixed rate bond market after an absence of just over ten months. The rates are competitive, with the 1 year bond sitting comfortably in the top 10 for its term and both the 2 year and 3 year bonds now appearing in our best buy tables. Once again we see a positive change from a less well known provider, who continue to provide the limited competition there is in the savings market.
This week we have also seen a selection of providers withdraw completely from the ISA market before the end of the tax year. Aldermore, The AA, Saga and BM Savings have all withdrawn their ISA accounts. It remains to be seen whether this is an administrative or a strategic move, but hopefully we will see these providers re-enter the market in the new tax year with some competitive ISA offerings.