Best fixed-rate savings deals: How to get 1.9% on a one-year bond

Savers looking to secure better returns are seeing fixed rate deals continue to nudge higher.

This week, challenger banks, QIB (UK) and Tandem have once again upped their fixed rate bonds. 

QIB (UK) is now offering 1.4 per cent fixed for a year. However, it is available on savings platform Raisin with a £50 bonus, which can bump the rate up to 1.9 per cent.

This requires £10,000 to open. QIB is an Islamic bank which offers Financial Services Compensation Scheme protection and is fully authorised by the Prudential Regulation Authority.

Savers depositing £10,000 or more with QIB (UK) via the savings platform Raisin will be eligible for a welcome bonus of £50.

QIB has also upped rates across all its fixed rate offerings – its 18-month deal is now the market leader paying 1.5 per cent, whilst its two and three year deals, paying 1.7 and 1.77 per cent respectively, also narrowly top the best buy table. 

Tandem Bank has also increased its one-year fixed rate deal to 1.41 per cent becoming the market leader while its two year and three-year deals, paying 1.67 per cent and 1.76 per cent respectively, fall just shy of the top.   

It currently also has the best buy easy-access rate in our tables.   

James Blower, founder and interim savings director at The Savings Guru said: ‘The new QIB (UK) rates on Raisin are very good – particularly if you factor in the bonus too.’

‘There’s certainly no way that a saver is going to get 1.9 per cent on £10,000 on a 1 year fix in the ordinary savings market anytime soon so I’d certainly say to savers that this Raisin deal is worth a look.’ 

There have been more than 400 rate fixed-rate rises since the start of last month as banks compete to top the best-buy tables, according to research by website Savings Champion.

Last Monday, two-year and three-year top spots changed hands four and five times respectively during the day.

Who are QIB UK?

QIB (UK) is the UK arm of the Qatar Islamic Bank and has been operating in Britain since 1982 having secured its full banking licence in 2008.

The bank claims to be the largest Islamic bank with a 42 per cent share of the Islamic banking sector.

With its headquarters in London, QIB (UK) offers Sharia compliant financing and investment products for both Islamic and non-Islamic clients alike.

It won The Banker’s UK country award for best Islamic Bank, which has brought some increased interest from non-Islamic customers.

On top of its range of savings products, it provides private banking services and structured real estate financing in the UK, and has been fully authorised by the Prudential Regulation Authority and regulated by the FCA and PRA.

It is a member of Financial Services Compensation Scheme (FSCS) meaning those who hold current and savings accounts with the bank are covered up to £85,000 or £170,000 if held in a joint account.

Islamic banks like QIB UK are prohibited from earning interest or benefiting from lending or borrowing money – instead, the rate on offer is an ‘expected profit rate.’

Islamic banks therefore operate slightly differently in that they don’t charge interest and savers can’t earn interest in the traditional sense.

The money you earn on your savings comes instead from the expected profit the bank makes from investing your money in various projects, rather than interest.

The expected profit is an issue for some savers as it isn’t guaranteed.

James blower said: ‘It’s not that savers risk sharing the losses – if the profit rate can’t be met, then the bond is cancelled and repaid with expected profit earned to date.’

This means the saver won’t lose out from QIB UK but could lose out in the market, according to Blower.

Blower says: ‘For example, if you took a Sharia one Year deal at 1.30 per cent last summer, and it couldn’t meet its expected profit by March and therefore decided to pay you out your capital and expected profit to date, you’d have been going into the market to save again but this time with rates at 0.56 per cent – so you’d have missed out on being able to lock in with a guaranteed interest rate.

‘That’s the main reason why some people avoid these deals due to that lack of certainty – while some savers are comfortable with expected profit rates, rather than fixed interest, not all are.

‘Although it’s worth mentioning all the Sharia banks having always paid out per the contract to date.’

What is Raisin?

Raisin is a savings platform which enables customers to open multiple savings accounts with multiple providers, without having to go through a full application each time they open a new account via that platform and keep track of how much they’ve got where through lots of online or paper statements.

It means that through a single online account, you can open multiple savings accounts with numerous different banks as and when you require without the usual form filling and admin.

Raisin are free to use and it currently offers savers a choice of 52 savings deals from across 13 providers.

Its savings deals comprise of fixed rates bonds, easy access accounts and notice accounts.

Its £50 welcome bonus only applies to customer’s first savings account with Raisin and requires a minimum deposit of £10,000 paid into a savings account for a term of six months or more.

James Blower, of The Savings Guru said: ‘There are only a limited number of banks on the platform and therefore they don’t always have access to the best rates. 

‘On the plus side, once you’ve set up an account with Raisin you don’t have to keep providing your details and opening new accounts with each provider, which you do if you are moving around savings in the market generally.

‘They are certainly worth a look and I think we will see these savings marketplaces continue to grow in the UK.’

Another advantage of savings platforms like Raisin is that by allowing you access to more than one provider, it enables you to spread the FSCS protection across your multiple holdings. 

For example, were you to save with six different banks that are all covered by the FSCS on the platform, you would be protected up to £85,000 in each account – notwithstanding any additional funds you might hold with the bank separately outside of the platform. 

We checked out savings platforms, including offerings by Flagstone and Hargreaves Lansdown in a recent article if you’re interested to find out more.

This post first appeared on Dailymail.co.uk