Best easy-access savings: Coventry and Marcus become top deals

It may not beat the excitement of defeating Germany 2-0 at Wembley, but like England fans, savers also have some reason to cheer.

The Marcus Bank savings account by Goldman Sachs and the new Limited Access Saver account by Coventry Building Society are now both offering savers an easy-access savings rate of 0.5 per cent.

The move – given the low rates on offer in general – catapult the pair to the top of the independent This is Money best buy table.   

Top rate: The popular Marcus account by Goldman Sachs bank will pay 0.5 per cent – more than double the average easy-access rate of 0.17%

The average easy-access account pays just 0.17 per cent interest, according to Moneyfacts. Many large banks are offering as little as 0.01 per cent to savers.   

James Blower, founder of The Savings Guru, says: ‘The moves by Marcus and Coventry to increase their easy-access rates to 0.5 per cent are significant for the savings market.

‘As a result of the NS&I rate cuts last year, we’ve seen billions of savings flow in to the market which has pushed rates down with best buy easy access rates dropping from 1 per cent to 0.4 per cent.

‘Although one year fixed rates have since improved, with four providers paying one per cent or more, easy-access rates haven’t budged.’

Both accounts do come with slight catches.  The popular Marcus account comes with a 12-month fixed-rate bonus of 0.1 per cent on top of its existing 0.4 per cent rate.

Those who open an account will automatically receive the 12-month fixed-rate bonus of 0.1 per cent as part of their interest rate.

Existing customers should also take advantage of the new bonus rate by opting in once logged into their account via the Marcus website.

Savers can stash away up to £250,000 whilst retaining the ability to withdraw cash from the account whenever they like.

Meanwhile, the Coventry account is a limited access – but savers can dip in six times a year without penalty. It is available to new and existing customers. 

‘As the Coventry account can be opened in branch, by post or telephone, as well as online, this is great news for those more traditional savers that do not like to do internet banking,’ said Anna Bowes, co-founder of Savings Champion. 

Both accounts can be opened with £1, and come with Financial Services Compensation Scheme protection.  

What does this mean for savers?

In recent months, easy-access rate rises have been short lived and the hope is that with two such established names making headlines, it might drum up a more competitive spirit between providers and kickstart some rate rises.

‘Charter Savings went top of the market at 0.5 per cent 12 days ago but, before today’s move, I’d have expected that rate to only last another week at most,’ said Blower.

‘Marcus and Coventry have big balance sheets of circa £20billion and £36billion respectively, so they can cope with the inflows which will come in from savers at these rates.

‘This means they can sustain a period of time at the top of the market and will force other providers to match or better them so I do expect us to see increases to other easy access rates starting as soon as tomorrow.

‘I don’t think we will see rates go above 0.55 per cent though, so I would recommend savers grab these deals when they come available.’

How can savers best fend off inflation?

The rate of inflation rose to 2.1 per cent last month on the back of a surge in fuel prices, food, drink and clothing.

There is currently not one savings account that can outpace the eroding power of inflation with many commentators predicting that worse is still to come.

‘If higher inflation and lower interest were to stay, you’ll soon see how quickly your cash is eroding in real terms,’ said Bowes.

‘It’s a toxic combination – you’re effectively already earning a negative interest rate, even without the Bank of England moving into this territory.’

Most of biggest banks are paying between 0.02 per cent and 0.06 per cent interest across their range of easy access accounts, according to Moneyfacts and therefore, savers could still benefit from moving their cash to a market leading provider.

‘By choosing the best accounts available you can at least mitigate the effects of inflation,’ said Bowes.

‘With inflation at 2.1 per cent, even if you are earning 0.5 per cent, the real value of your money will have fallen to £49,216 after a year – and after five years, it would be worth just £46,203 – that’s a fall in value of over 7.5 per cent.’

But those who leave their cash festering with a high street bank or NS&I will feel the effect of inflation more than others, according to Bowes.

‘If you leave your cash earning just 0.01 per cent, a deposit of £50,000 would have fallen to just £48,976 after a year, or £45,088 in real terms over five years, assuming an inflation rate of 2.10 per cent, meaning 10 per cent of your money will have been consumed by inflation,’ said Bowes.

Should savers consider fixed rate deals instead? 

The best five-year fixed rate account, offered by Gatehouse Bank, is currently paying interest of 1.6 per cent – but that requires locking up your cash until 2026.

Savers opting for a shorter-term horizon could consider the latest one-year fixed deal by Gatehouse Bank offering 1.1 per cent or by Shawbrook Bank and Oaknorth Bank, both offering 1 per cent respectively.

‘In terms of fixed rates, there is a significant premium on one year rates versus easy-access rates and those savers who don’t need access to their money for a year may well want to consider taking the higher rates available there,’ said Blower.

‘I don’t see fixed rates improving significantly from here because the increases we’ve seen the past two months are from a small selection of providers competing hard for money.’

‘Unless the wider market follows suit, I can’t see increases being sustained so think one-year rates are unlikely to push much higher than where they currently are.’

This post first appeared on Dailymail.co.uk