Competition among financial firms for a slice of the nation’s savings is intensifying, with Nationwide launching an account paying a “market-leading” 8% interest.
A string of Bank of England interest rate rises since late 2021 have pushed up savings rates across the board. The Bank voted to leave interest rates on hold on Thursday at 5.25%, but that is still well above the 0.1% they were at in November 2021 before the rate hiking cycle began.
With some easy-access savings accounts still offering only about 1% interest, the financial data provider Moneyfacts said it was essential for savers to “ditch and switch” if their loyalty was not being rewarded.
Nationwide’s new deal is a regular savings account, available exclusively to its current account customers.
The building society is also attempting to attract new current account customers by offering a £200 payment to anyone who moves to it using the switching service.
The 8% interest rate lasts for a year, and customers can save up to £200 a month in the online-managed account, which permits up to three withdrawals within the 12 months. If four or more withdrawals are made, the rate on the account will drop to 2.15%.
A growing number of savings accounts are now paying 6%-plus interest.
First Direct has a regular savings account that lets people put away between £25 and £300 a month and pays 7%.
The UK government’s savings bank, NS&I, recently challenged high street rivals by launching new issues of its one-year fixed-rate guaranteed growth bonds and guaranteed income bonds paying 6.2% interest.
These rates, which are available to new and existing customers, are the highest offered on these accounts since they first went on sale in 2008. It means that, several weeks on, NS&I still holds the top spot in the savings best-buy tables for one-year fixed-rate deals.
Higher interest rates appear to have boosted people’s appetite for saving.
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NatWest reported this week that the number of its customers opening fixed-rate savings accounts had “rocketed”. As many as 17 times more fixed savings accounts were being opened compared with the number taken out in the first half of 2019, said a bank spokesperson.
NatWest has increased the interest rate on its one-year fixed-rate account to 5.56%, rising to 5.6% for balances above £100,000, and it also offers a regular savings account that pays 6%.
In response to the Nationwide announcement, Rachel Springall, a finance expert at Moneyfacts, said: “Regular savings accounts work differently to easy access accounts, so it’s important customers read through the account’s criteria to ensure it is right for them.”
On the market more generally, she said: “There has been a positive uplift in savings rates overall, thanks to competition and back-to-back Bank of England base rate rises, but not every consumer may be seeing the benefits. Indeed, less than a third of the savings market pays above base rate.”
