They may not have the name recognition of big high street banks, but savers may want to give small, local building societies a second look if they are seeking the best interest rates.
They currently have some of the highest-paying accounts on the market. Most notably, Buckinghamshire Building Society is offering the best buy easy-access rate of 2.9 per cent on balances up to £500,000.
And number of other smaller mutuals are offering best-buy notice accounts.
Be quick: Smaller building societies, including Mansfield (pictured) are offering some of the best rates on the market, but experts are warning that some of these deals won’t last long
These deals enable savers to withdraw their funds following a notice period, typically ranging between 30 and 180 days, but can offer savers a better return than they might otherwise achieve with an easy-access account.
But while the rates are undeniably good, savers might miss out on some of the services they expect from big banks – in particular online banking.
While some smaller building societies offer it, many don’t and some will require customers to visit branches or communicate by phone or post.
We look at the savings rates on offer with smaller building societies, and explain what customers need to know before signing up for an account with one.
– Check out the best easy-access savings rates here.
Easy access… with a catch
Whilst the headline rates will whet the appetite of any savvy saver currently scouring the market, these deals often come with catches that may make them less enticing.
Buckinghamshire’s 2.9 per cent deal is a Single Access Saver meaning that although it is technically easy-access, it only permits one withdrawal per year without penalty.
In fact, a second withdrawal within a calendar year will result in the automatic closure of the account.
It means this deal will only suit someone using the account as an emergency fund, which they only expect to withdraw from in the worst case scenario.
There is also the matter of opening and managing the account. It must be opened in person or by post. Once opened, savers will need to register to check their account online or to request a transfer of funds.
Savers who feel they may need more access than one withdrawal per year, could instead sign up to Buckinghamshire’s Triple Access Saver paying 2.6 per cent.
However, savers can get better rates by going to Coventry Building Society and Al Rayan Bank which are paying 2.85 per cent and 2.81 per cent.
What about notice accounts?
Stafford Railway Building Society is the smallest of the UK’s 43 building societies, but it is offering some of the most generous notice accounts.
Its 3.5 per cent deal requires 120-days notice, so savers will need to bear in mind it will take them four months to access their cash. Only three withdrawals are permitted per year, which is another factor to consider.
Savers can apply online or open in branch or by post. However, while the Stafford account can be opened online, it can’t be managed online – so savers will need to give instructions in branch or by post.
Savers will also need at least £5,000 to open an account, which may be too high a hurdle for some.
Marsden Building Society is also offering a 180-day notice account paying 3.85 per cent.
However, the account can only be opened and managed in a branch and the minimum amount required to begin with is £10,000.
Read the small print: Many of the deals offered by smaller building societies savings deals have restrictions so it’s important to read beyond the headline rate
Marsden is also offering a 3.4 per cent in-branch cash Isa deal with a 120-day notice period for those looking to protect the interest they earn from the taxman.
This deal has a lower barrier to entry with just £1,000 required to open the account. However, as the name suggests the account is available in branch only.
There is no rule which says people who open the accounts must live in the local area, but having to manage it in-branch will be difficult for those outside of the North West.
Marsden only had eight branches based around Burnley and Preston, which will limit the number of people close enough or with sufficient time to go in and open an account with it and then to make any subsequent withdrawals.
A spokesperson for the Savings Guru says: ‘There are some catches to be aware of with many of the smaller building societies.
‘There’s actually no geographical restrictions on any of the best deals at present, but there are an array of withdrawal limits and other restrictions to be aware of. The main downsides to them are the lack of internet banking.
‘For example, Stafford’s deal can’t be managed online, while Buckinghamshire’s deal can only be opened by post or branch.
‘This is the main thing to be aware of as, with the postal strikes ongoing, there’s delays to mail and its savers may lose out on interest while waiting for everything to be received and confirmation to be sent out by post. However, for non-internet users, they are great rates.
‘The Mansfield Isa notice account is a really good rate but you do need to give six months to get it.
‘Given that you can get the same rate on easy access just by opening a Virgin Money current account, then it’s probably not worth it.’
Savers who might be interested in these deals are being urged to move quickly or risk missing out.
The Savings Guru spokesperson adds: ‘Stafford is the smallest building society so I expect that account to be gone this week and Buckinghamshire isn’t much bigger so again, I doubt those rates will make it to Friday even.’
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