Savings update: rates to continue to topple after interest rates are slashed
Savers can expect to see their rates cut from next month following the fall in Bank of England base rate from 0.5% to 0.25% announced last week.
Already rates for new savers taking out both easy-access accounts or fixed rate deals have started to fall.
The top easy-access cash Isa is now 1.2% from both Sainsbury's Bank and Teachers Building Society but these could fall soon following the cut in base rate. Coventry Building Society pays a lower 1.1% but has already been cut following the lower 0.25% base rate.
On fixed rate cash Isas top deals include 1.3% from Shawbrook Bank and 1.2% from Aldermore Bank. For two years Paragon Bank pays 1.5% and Leeds Building Society and Shawbrook Bank pay 1.4%.
Easy access accounts
On easy-access taxable deals French-owned RCI Bank Freedom account still pays 1.45% before tax (1.16% after tax). With this account you are covered by the European compensation scheme which gives €100,000 (£84,000) worth of cover is the bank goes bust.
Shawbrook Bank, where your money is covered up to £75,000 by the UK scheme, pays 1.25% (1%).
On the high street the top rate is 1.16% (0.93%) from Virgin Money Defined Access as long as you make no more than three withdrawals a year.
Virgin Money's new Manchester United Red Devils account pays 1.05% (0.84%) with no withdrawal restrictions.
Top fixed rate deals include 1.6% (1.28%) from Swedish-owned Ikano Bank or 1.55% from Paragon Bank for one year.
For two years Paragon pays 1.8% (1.44%), Ikano Bank 1.75% (1.4%) and Shawbrook Bank 1.7% (1.36%).
This story was originally written for our sister publication, Money Observer.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
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.