Best buy savings rates creep higher: Atom Bank ups its easy-access account and Al Rayan Bank increases its fixed deals AGAIN
- Atom Bank now offers market leading easy-access deal paying 0.75%
- Al Rayan is offering market leading one year fixed rate deal paying 1.5%
- With 22 rate rises in past week alone this trend is expected to continue
The top of the savings is continuing to edge higher after challenger Atom Bank and Britain’s oldest and largest Islamic bank, Al Rayan, upped rates.
App-based Atom Bank, which was in the news last year after introducing a four-day working week without cutting its employees pay, upped its easy-access account from 0.65 per cent to 0.75 per cent.
Al Rayan Bank, which was founded in 2004, has also upped some of its fixed rates for the second time in a week.
Upward trend: There’s been 22 providers increase rates over the past week and only 3 reduce rates.
Most notably, its one year fixed rate increased from 1.45 per cent to 1.5 per cent and its two year fixed rate deal rose from 1.66 per cent to 1.71 per cent – both becoming market leaders.
The news will be bittersweet for savers after inflation rose to a near 30-year high of 5.5 per cent in January.
Atom Bank’s Instant Saver now tops the easy access market, although it is closely followed by Shawbrook Bank, which upped its rates from 0.67 per cent to 0.72 per cent, and Investec which is currently paying 0.71 per cent.
Savers can open an account with Atom without having to even deposit £1 and can stash away as much as £100,000 into the account.
It allows for unlimited withdrawals and is covered by the Financial Services Compensation Scheme which means savers cash is protected up to £85,000 per individual, or £170,000 in the case of joint accounts.
Someone stashing away £20,000 in Atom’s Instant Saver account could expect a return of £150 after one year if its variable rate remains the same.
With the average easy access rate paying just 0.22 per cent according to Moneyfacts, compared to 0.56 per cent in February 2020, we are still a long way off the rates that were on offer pre-pandemic.
However, on top of the recent base rate rises by the Bank of England, the easy access rate rises today should be deemed another small step in the right direction.
The expectation is that other savings providers will be encouraged to follow suit.
James Blower, head of digital at Moneyfacts, said: ‘I think the news on easy-access rates is very encouraging for savers.
‘We’ve seen RCI Bank also up its rates to 0.7 per cent today, as well as Shawbrook and Atom Bank, to give us four providers above the 0.7 per cent mark and I expect there to be other providers joining them next week.
‘There’s a good chance this sets a new benchmark and that we see the clutch of providers paying 0.6-0.65 per cent respond and join them.’
Savers looking to take advantage of Al Rayan’s fixed rate deals will need to deposit £5,000 to open an account but can thereafter deposit up to a maximum of £1million.
It is also part of the FSCS and therefore savers’ deposits will be protected up to £85,000 per individual.
Someone stashing £20,000 into Al Rayan’s 1.5 per cent one year fixed rate deal could expect to earn £300 in interest over the course of the year.
| Type of account (min investment) | 0% tax | 20% tax | 40% tax | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ONE YEAR | ||||||||||||
| Al Rayan Bank (£5,000+) (3) | 1.50 | 1.20 | 0.90 | |||||||||
| Atom Bank (£50+) | 1.45 | 1.16 | 0.87 | |||||||||
| Tandem Bank (£1,000+) | 1.45 | 1.16 | 0.87 | |||||||||
| Close Brothers Savings (£10,000+) | 1.40 | 1.12 | 0.87 | |||||||||
| Investec (£5,000) | 1.40 | 1.12 | 0.84 | |||||||||
| 18 MONTHS | ||||||||||||
| Al Rayan Bank (£5,000+) (3) | 1.55 | 1.24 | 0.93 | |||||||||
| Gatehouse Bank (£1,000+) (3) | 1.51 | 1.21 | 0.91 | |||||||||
| TWO YEARS | ||||||||||||
| Al Rayan Bank (£5,000+) (3) | 1.71 | 1.37 | 1.03 | |||||||||
| Atom Bank (£50+) | 1.70 | 1.36 | 1.02 | |||||||||
| THREE YEARS | ||||||||||||
| Ahli United Bank (£5,000+) | 1.87 | 1.50 | 1.12 | |||||||||
| Al Rayan Bank (£5,000+) (3) | 1.87 | 1.50 | 1.12 | |||||||||
| FIVE YEARS | ||||||||||||
| Monument Bank (£25,000+) | 2.20 | 1.76 | 1.32 |
There have now been more than 300 rate rises recorded across the fixed rate market since 16 December, according to analysis by Savings Champion, and there is expected to be more positive movement over the coming weeks and months at the top of the market.
James adds: ‘We saw 22 providers increase rates over the past week and only three reduce – this is a trend I expect to continue in the coming months.
‘It’s impossible to predict where inflation and base rate is heading but the outlook for savers is improving and moving in the right direction.
‘My advice is that there are better deals coming to market so keep a close eye and switch your money when you see something that appeals, particularly those who are only receiving 0.01 per cent on their savings.’
THIS IS MONEY’S FIVE OF THE BEST CURRENT ACCOUNTS
Santander’s 123 Lite Account will pay £140 cashback to switchers and up to 3% cashback on household bills. There is a £2 monthly fee and you must log in to mobile or online banking regularly, deposit £500 per month and hold two direct debits to qualify.
Virgin Money’s current account offers a £100 Virgin Experience Days gift card when you switch and pays 5.02 per cent monthly interest on up to £1,000. To get the bonus, £1,000 must be paid into a linked easy-access account and 2 direct debits transferred over.
Club Lloyds’s Current Account pays 0.6% interest on balances of up to £3,999, while those with sums of between £4,000 and £5,000 will earn 1.5% on that balance. There is no cost if you pay £1,500 each month, otherwise a £3 fee applies. Must hold two direct debits.
First Direct will give newcomers £150 when they switch their account. It also offers a £250 interest-free overdraft. Customers must pay in at least £1,000 within three months of opening the account.
Nationwide’s FlexDirect account comes with up to £125 cash incentive for new and existing customers. Plus 2% interest on up to £1,500 – the highest interest rate on any current account – if you pay in at least £1,000 each month, plus a fee-free overdraft. Both the latter perks last for a year.
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