A BANK has launched several new market-leading savings accounts but there’s a catch.
Savers looking to make the most of their deposits can now get more back as savings rates hit a 14-year high.
2
2
Isbank, a Turkish bank that operated in the UK, has exclusively launched six new savings accounts on the Raisin UK marketplace.
All accounts pay customers 5% back on their deposits.
It comes after traditional high-street banks have been accused of resisting passing on higher interest rates to savers in recent weeks.
The Bank of England’s base rate is at its highest in 14 years and is currently stood at 4.25%.
But savvy savers can still get decent returns on their deposits by looking away from traditional high street banks and opening accounts with banks like Isbank.
The interest charged on the new saving accounts is the most competitive on the market right now, according to Sarah Coles, personal finance expert at Hargreaves Lansdown.
But there’s a major catch as you’ll only get these market-leading rates by locking away your savings for a minimum of one year.
Sarah said: “These are fixed rate savings, which tend to offer better rates in return for tying your money up for anything between one and five years.
Most read in Money
“If you know you won’t need the money for the fixed period, it’s a great way to earn more interest.”
With a fixed-rate bond, customers are not able to withdraw their cash within the account’s stated term.
This differs from easy access accounts which allow customers to make unlimited withdrawals whenever they need to.
Isbank’s six new accounts are hosted by Raisin UK exclusively and give savers the option to lock away their cash for one, two, three, four, five and seven years.
Customers will need to deposit a minimum of £1,000 in the accounts to earn 5% back.
So if you deposited the minimum £1,000 in the one-year fixed account you’ll gain £50 in interest at the end of the full term.
Those worried about saving into the bank which has only increased in popularity in recent weeks shouldn’t fret, according to Andrew Hagger, founder of Moneycommms.
He said: “Isbank is a Turkish Bank with offices in the UK and is a member of the Financial Services Compensation Scheme.
“This offers protection of up to £85,000 of savings in these accounts per individual.”
This means that in the rare event that you hold money with a UK-authorised bank, building society or credit union that fails, you’ll automatically be compensated up to £85,000 back.
But it’s important to recognise that fixed-rate savings accounts aren’t for everyone.
Andrew Hagger said: “Although 5% is great and very tempting, don’t lock away your money unless you are 100% sure you won’t need access to it during the fixed term.
“Once you commit you won’t be able to get your hands on it for a full 12 months.”
Sarah Coles said: “Everyone needs to be working towards having 3-6 month’s worth of essential expenses for emergencies – and this needs to be in an easy access account, so you can get your hands on it straight away if you need it.”
So if you’re not in the right financial position to lock away your savings for a set period of time – don’t worry.
There are plenty of alternative savings accounts which are currently paying customers decent returns.
What are the alternatives to fixed-rate savings accounts?
There’s a handful of other types of savings accounts available to customers which might better suit your circumstances.
These include easy-access accounts and regular savings accounts which allow greater flexibility when it comes to withdrawing your cash to spend on emergencies.
Of course, if you’re looking for a new savings account it’s always worth having a browse on price comparison websites.
Moneyfactscompare, Compare the Market, Go Compare and MoneySupermarket will help save you time and show you the best rates available.
These sites let you tailor your searches to an account type that suits you.
Here’s a list of the other types of savings accounts on offer.
Easy access savings accounts – up to 3.71%
These savings accounts do what they say on the tin – they usually allow unlimited cash withdrawals.
However, this perk means they tend to come with lower returns, but there are a number of accounts worth considering.
Chip’s instant savings account offers customers 3.71% back in interest and unlimited cash withdrawals as long as they invest £1.
Those saving £1,000 in the account could expect to gain £37.10 in interest after 12 months.
Shawbrook Bank’s easy access account pays customers 3.65% back on savings between £1 and £10,000.
Sarah Coles said: “These rates are far better than the rates available on the high street, so if your savings are sitting with the same bank where you hold your current account, it’s well worth switching somewhere more rewarding.”
Notice savings accounts – up to 4.10%
Notice accounts offer slightly higher rates than easy-access accounts.
But you’ll need to give advance notice to your bank (up to 180 days in some cases) before you can make a withdrawal or you’ll forfeit the interest.
Sarah Coles said: “If you need access to your cash within the next year, but have the flexibility to give plenty of notice before withdrawing any of it, a notice account may work for you.
“You can currently get 4.1% on a 120-day notice account from Cynergy Bank.”
Savers depositing £1,000 in this account can expect to gain £41 in interest after 12 months.
Regular savings accounts – up to 7%
These accounts generate decent returns but only on the basis that you pay in a set amount each month.
To get the best rates you’ll also need to hold a current account with the providers below as these linked regular savings accounts pay the top rates.
First Direct offers a regular saver paying 7% in interest.
You’ll need to save between £25 and £300 a month, and up to £3,600 a year.
For example, if you were to save £300 every month for 12 months with this account, you’ll earn approximately £136.50 in interest.
Lloyds Bank’s Club Lloyds Monthly Saver will pay 6.25% interest on savings of up to £400 a month, so if you’re looking to put away a little here and there it could be a good account for you.
If you deposit £400 every month for 12 months you will have a balance of £4950 after all interest is paid – but you’ll need to be a Club Lloyds member to have access to this account.
