SmartSave launches best buy savings fix of 5.41%

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SmartSave has become the latest bank to take top spot for one year fixed rates on This is Money’s independent best buy savings tables.

In an incredible 24 hours, Investec launched a table-topping 5.35 per cent rate. 

Then, Al-Rayan came in with 5.36 per cent; OakNorth 5.37 per cent, before Zopa and SmartSave briefly topped the table with 5.38 per cent rates. 

Then today, Atom launched a market leading 12 month deal paying 5.4 per cent, leapfrogging the competition – before SmartSave came in with a 5.41 per cent deal to become the seventh best buy in two days. 

Market leader: SmartSave became the latest savings provider to take top spot on This is Money’s independent best buy savings tables

Those who open the SmartSave account need to do so with a minimum of £10,000 – a relatively high opening balance for fixed account. The account can be opened online.

For Atom Bank’s deal, savers need to sign-up via its mobile app using their smartphone, which takes about 10 minutes. They can then get started with as little as £50 and deposit up to a maximum of £100,000.

Money held with Atom and SmartSave is covered by the Financial Services Compensation Scheme (FSCS) which means deposits are protected up to £85,000 should anything happen to the bank.

Someone depositing £10,000 in SmartSave’s one-year deal will earn £541 interest over the course of the year.

It’s worth remembering that savers who overstep their personal savings allowance may be liable to start paying tax on some of the interest earned.

At present, basic rate taxpayers can earn up to £1,000 savings interest without paying tax while higher rate-taxpayers get a £500 allowance. Additional rate taxpayers get nothing.

On top of its one-year fix, Atom Bank has also launched two micro-fixes. 

A six-month deal paying 4.8 per cent and a nine-month deal paying 4.95 per cent.

Someone putting £10,000 of cash in the six month deal could expect to earn £240 of interest in time for Christmas.

Some of the best ‘micro-fixes’ are also available via savings platforms. 

For example, savers can get 4.9 per cent for a six-month fix via Raisin’s platform* or 4.96 per cent via Hargreaves Lansdown’s savings platform, Active Savings.*

How high will rates go?

This is the question likely churning through many a saver’s mind. The average one-year fix has risen from 3.84 per cent to 4.38 per cent since the start of April.

There seems to be a new best buy on a weekly and often daily basis. Longer term fixes have also seen some big moves.

Much will depend on how high inflation proves to be over the coming months, and how willing the Bank of England is to push the base rate higher in order to bring it to heel.

Although inflation fell to 8.7 per cent in the 12 months to April, it did not fall by as much as financial markets had predicted.

This resulted in a widespread belief that we are in for further interest rate hikes.

James Blower, founder of savings website, Savings Guru says: ‘It’s incredibly hard to predict where rates are going. 

‘Earlier in the year, the forecasts were for base rate to peak at 4.5 per cent whereas now markets are pricing in a good chance it can go as high as 6 per cent in the next year.

‘That’s driving up fixed rates as banks respond. 

‘Rates will continue to rise if we keep getting bad news on inflation and the economy but will fall if it looks like the base rate increases are doing their job.

‘My view is that we probably have a little bit further to go now and that Base is going higher and staying higher than expected for the next couple of years.

‘Guessing the markets is hard so I’d suggest that, if savers are happy with the rates on offer, they grab them. 

‘With a one year-year fix paying 5.4 per cent, a 5.45 per cent deal available for two years and now a three year fix paying  as a risk free return, it’s certainly enticing to fix at the moment.’

This post first appeared on Dailymail.co.uk