A new challenger bank has launched a best buy savings rate of 2 per cent as fixed bond deals continue to inch higher.
Recognise Bank was given the green-light to rake in deposits earlier in the week and is part of the City of London Investment Group.
The account is a five-year fix and marks the first time a 2 per cent deal has been on offer since the early weeks of the pandemic in 2020, when Gatehouse Bank offered the same rate as ‘expected profit.’
Best buy: Recognise Bank has launched a top five year fix at 2% and a 95 day notice account paying 1%
Accounts can be opened with £1,000 but only online, cash is protected by the Financial Services Compensation Scheme to the tune of £85,000 and deposits will be used to lend to small and medium sized businesses.
The rate is far superior to other deal which require savers fixing their money until 2026.
Atom Bank is next in our independent best buy tables with 1.84 per cent, followed by Secure Trust at 1.8 per cent.
It is unusual for a new challenger to launch into the niche long-term fixed rate market, and the gap between one and five year fixes has narrowed somewhat in recent months.
For example, savers can grab 1.45 per cent fixed for a year or 1.76 per cent over two years with Al-Rayan Bank.
Rachel Springall, finance expert at information website Moneyfacts, adds: ‘It would not be too surprising for there to be savers who are hesitant at locking their money away for the longer-term, but there are plenty of shorter-term fixed bond options to consider and even notice accounts.’
On the latter, Recognise has also launched a 95 day notice account paying 1 per cent, which is one of the best rates currently on offer for this type of account.
In comparison, only Oaknorth offers a slightly better over 95 days at 1.01 per cent, while the best buy easy-access open to all is currently 0.6 per cent.
These types of notice account offer savers a better rate than easy-access, but more flexibility than locking away money that cannot be access for a long time.
Rachel adds: ‘Savers who feel uneasy in locking their money away for a year or more may find notice accounts as an alternative between fixed and easy-access accounts, especially as notice rates are on the rise.
‘Monthly, the average notice rate rose for the fifth month running to 0.47 per cent and is at its highest all year. There are many challenger banks within this arena, as there are in the fixed bond market.’
No rates currently on offer from a mainstream savings provider with FSCS protection can currently come close to inflation, which was recorded as 3.2 per cent for August.
Jason Oakley, chief executive of Recognise Bank, said: ‘By saving with Recognise Bank, customers will not only have a safe home for their money, they will also know that their FSCS-protected savings are helping ambitious SMEs, so they are directly supporting the UK economy as well.’
The bank says business savings products will launch in the future and is aiming for 50,000 customers.
Backed by cloud computer technology, the bank says its goal is to make lending decisions quicker and speed-up access to funds, via a network of regional hubs in London, Manchester, Birmingham and Leeds.
Recognise currently offers a range of unregulated lending options including commercial mortgages and bridging loans, with professional buy-to-let mortgages to follow soon.
Since opening in November 2020 the bank claims to have already received £750million in loan enquiries and is aiming to provide more than £1.3billion of business lending over the next five years.
Fixed-rates nudge higher but shelf life shortens
The average one year fixed-rate bond has ticked up from 0.6 per cent in August to 0.67 per cent today, according to Moneyfacts.
Meanwhile the average long-term fixed rate bond is up from 0.87 per cent to 0.94 per cent.
This is also higher than in September 2020, but a long way off from 1.34 per cent for one year and 1.64 per cent for longer term recorded in September 2019.
Furthermore, the average shelf life for a fixed-rate bond has fallen to 33 days on average, compared to 53 days a month ago, suggesting deals are not sticking around for as long.
Rachel adds: ‘Savings providers will need to act quickly to react to the notable flux of rate rises in the market and indeed any demand from savers looking to fix their cash for a competitive return. ‘
