Mutual offers 4.11% fixed-rate account
Newcastle Building Society has launched a fixed-rate account paying up to 4.11% AER over three years.
The account, which is online access only, is available to anyone with between £5,000 and £250,000 to lock away and matures on 1 May 2012. Interest is paid annually, so you will benefit from compound interest. However, a monthly interest option is also available, with a lower AER of 4.08%.
This account does not allow any early withdrawals.
Steve Urwin, senior marketing executive at Newcastle Building Society, says: “The account will give savers the opportunity to operate their account at their convenience, while watching their savings achieve a great return of up to 4.11% AER, with a guarantee that the rate will remain unchanged until maturity.”
How does it compare?
The savings market has recently seen an influx of longer-term fixed accounts, ranging from two to five years. While one-year accounts are normally the most popular fixed deals, savings providers are increasingly offering their best rates to people prepared to lock away their money for a longer period of time.
Opting for an account with such a long term might not be a good move for you. For one, you must be certain that you won’t need your money during the fixed period as withdrawals are often not permitted or come with penalty charges.
In addition, the Bank of England base rate could increase within your fixed period, and new savings accounts could be launched with higher AERs.
However, if you are seeking the security of a two-year or more guarantee on rate, then there is plenty of choice on the market.
Close Brothers offers a two-year Premium Gold account paying 4.3% AER on deposits of between £10,000 and £10 million. No early withdrawals or additional deposits are permitted with this deal.
Be aware that this account is only available until 8 April.
Cater Allen Private Bank, meanwhile, offers two fixed bonds paying up to 4.11% AER.
The first is fixed for two years, and pays 3.68% AER for anyone with between £5,000 and £50,000 to deposit. The rate increases as your balance does; deposit more than £50,000 (the maximum amount that is protected by the Financial Services Compensation Scheme) and your rate will rise to 3.85% AER. If your balance is more than £250,000, the rate rises again to 3.92% AER and if you have £1 million to save, you’ll earn 4%.
Cater Allen’s three-year bond, meanwhile, pays 3.85% for anyone with between £5,000 and £50,000 saved; 4% for anyone with £50,000 to £250,000 deposited; 4.08% if your balance is between £250,000 and £1 million; and 4.11% if you have a balance of £1 million plus.
West Bromwich Building Society offers an E Bond paying 4.2% AER until 31 April 2014 for anyone with at least £5,000 to deposit. Or it pays 4.1% on deposits of £5,000 until 31 April 2012.
Withdrawals or additional deposits are not permitted with either of these deals, and you can only manage your account via post or the telephone.
ICICI Bank is paying up to 4.1% AER on its HiSAVE two-year fixed account or 3.9% AER on its HiSAVE 12-month deal. Both bonds require a deposit of £1,000. Neither of these accounts allow early access withdrawals.
Nationwide recently launched an account paying 4.15% AER - but you will have to lock your money away for five years.
Halifax's websaver deal, meanwhile, also pays 4.1% AER on deposits of £500 but again this is a five-year fixed deal.
This is effectively paying interest on interest. Interest is calculated not only on the initial sum borrowed (principal) or saved (see APR and AER) but also on the accumulated interest. The more frequently interest is added to the principal, the faster the principal grows and the higher the compound interest will be. Compound interest differs from “simple interest” in that simple interest is calculated solely as a percentage of the principal sum.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.