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Where to get 5% interest on savings – and is it worth it?

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Savings rates have risen at such a pace this year that there are now a selection of banks and building societies paying 5 per cent interest or even more.

That is something of a sweet spot for many savers, and could entice them into switching accounts – despite still falling well below the current 10.1 per cent rate of inflation.

But the range of accounts paying 5 per cent is still limited, with many having a ‘catch’ such as requiring the holder to lock away their money for more than three years, or to have an active current account with a particular bank. 

The savings sweet spot: Savers will likely be tempted by any deal that is offering 5%. However the deals may not be suitable so always check the terms and conditions.

These conditions may not be suitable for some savers, so it’s always worth checking the small print.

To help, we took a look at all the deals currently breaking the 5 per cent barrier, and asked an expert from the Savings Guru to give their verdict on whether it is worth signing up. 

Meanwhile, you can check the latest best savings rates in our independent tables.

Linked savings accounts

Nationwide’s FlexDirect current account

Savers looking for 5 per cent in-credit interest from their current account might want to consider Nationwide’s FlexDirect.

Someone keeping at least £1,500 in the account could earn £75 in interest over the course of one year.

Savers can also secure themselves a £200 bonus for switching their main current account over to the FlexDirect account – the juiciest switching incentive currently on offer. 

Worth the move? Bank account switchers can secure 5% interest for one year by switching to Nationwide. Plus joiners will receive £200 cash

Worth the move? Bank account switchers can secure 5% interest for one year by switching to Nationwide. Plus joiners will receive £200 cash

However, the major drawback is that the special rate will only be available to those who don’t already have a FlexDirect account. 

The 5 per cent interest rate is also on available on balances up to £1,500, and for the first 12 months.

This means the 5 per cent rate ends after one year, after which it drops to just 0.25 per cent. So it may be worth looking elsewhere after the 12 months for a better return on your money.

It’s also worth noting that to benefit from the in-credit interest, account holders must pay in a minimum of £1,000 each month. If the monthly income being deposited into the account drops below £1,000, they won’t receive any interest that month.

Barclays’ Rainy Day Saver

The Barclays Rainy Day Saver account pays 5.12 per cent interest on balances up to £5,000.

The account can be opened with as little as £1. Anything over £5,000 will only earn 0.15 per cent, so it won’t be worth having anything above that in this account.

Someone stashing away £5,000 in the Rainy Day Saver will earn £250 in interest after one year.

However to benefit, savers will need to be a Barclays Blue Rewards member, which means opening a Barclays bank account in order to apply online.

Barclays Blue Rewards is a way to collect rewards, including up to £5 a month for having two direct debits paid out of a Barclays current account.

However, there are a few catches, including a £5 monthly membership fee and a commitment to pay at least £800 into the account each month.

The Savings Guru verdict:

‘The 5.12 per cert Blue Rewards Saver is an attractive rate, but there’s a cap of just £5,000 on this rate and there’s a £5 monthly fee – albeit you can earn this back in rewards for having two direct debits coming out of the account. 

‘It has some good rewards for Barclays customers and our view is that, if you’re an existing Barclays customer, it is definitely worth looking to transfer to it – but we think there are better deals elsewhere for those thinking of moving provider.

‘Nationwide’s 5 per cent interest rate is only paid on the first £1,500 in your account but Nationwide are paying a huge £200 for switchers currently and, unlike Barclays, there are no fees for using the account. 

‘If you keep a minimum balance of £1,500 with Nationwide all year then that’s £275 in your first year with them, so this is definitely worth looking at for anyone thinking of moving their current account.’ 

Fixed rate savings accounts

There are now a number of providers breaking the 5 per cent barrier on their fixed rate savings bonds. 

However, savers will need to be prepared to lock their money away for three years or more. Many will likely be hesitant about fixing their savings for such a long period, particularly at a time when rates are rising.

This is because, once the cash is held within a fixed rate account, savers cannot typically add or withdraw funds until the end of the fixed term period – at least without incurring a considerable penalty.

The highest rate on the market is offered by Gatehouse bank. Its five year-deal pays 5.1 per cent.

Savers need to deposit at least £1,000 and open the account online. They can also manage the account via Gatehouse’s smartphone app.

Top rate: Gatehouse Bank is paying 5.1% on its five-year fixed savings bond

Top rate: Gatehouse Bank is paying 5.1% on its five-year fixed savings bond 

It’s worth pointing that the rate is the ‘expected profit rate’ under Sharia compliant accounts. The bank monitors the target profit on a daily basis to ensure it is achievable. 

Someone putting £10,000 in this account could expect to earn £2,823 after five years.

It’s closely followed by Close Brothers, which has a five-year deal paying 5.05 per cent, and Atom Bank which has a five-year deal paying 5 per cent. 

Gatehouse Bank is also offering a three-year deal paying 5 per cent.

What’s more, Gatehouse Bank’s deals are available via the savings platform, Raisin UK* – a type of savings marketplace where savers can manage multiple savings accounts in one place.

Raisin UK is currently offering a £30 welcome bonus, exclusively to This is Money readers* who sign up and deposit at least £10,000 into one of its accounts.

This means someone depositing £10,000 in the three-year Gatehouse deal via Raisin could essentially secure themselves a £1,530 return, which works out as an effective 5.1 per cent rate over three years.

The Savings Guru verdict:

‘The best one-year fixed deal pays 4.5 per cent [also with Gatehouse Bank], which is only 0.6 per cent below the top five-year rate. Our view is that this, or anything that comes in above it, is worth securing. 

‘Our expectation is that we may not get to five per cent on one year accounts so this is definitely worth considering. 

‘We think there may be a bit further for interest rates to go on longer term fixes but, if you don’t share our view then the 5 per cent for Gatehouse on three years or 5.1 per cent from Gatehouse for five years are worth taking.’

Club Lloyds customers could take advantage of an exclusive savings account paying 5.25%

Club Lloyds customers could take advantage of an exclusive savings account paying 5.25%

Regular savings accounts 

A regular savings account is a monthly saver which allows people to set aside cash each month, up to a certain amount.

They can be an ideal option for those looking to start a savings habit, who may not already have a cash pot built up.

Club Lloyds Monthly Saver

Lloyds Bank is currently offering the highest-paying regular savings account. It pays 5.25 per cent fixed for 12 months, and allows savers to stash away between £25 and £400 every month which must be done in one standing order.

Someone depositing the maximum £400 every month for 12 months will earn £126 in interest. To benefit, savers will need to open a Club Lloyds current account.

After 12 months they’ll get their interest and the account will change to a Standard Saver.  This account currently has a rate of 0.40 per cent. 

NatWest and RBS Regular Saver

NatWest and RBS both currently pay 5.12 per cent on balances up to £1,000 on their regular savings accounts, with a maximum monthly deposit of £150 allowed.

However, once savers’ balance exceeds £1,000, the rate falls to 1 per cent on the amount between £1,001 and £5,000 and then down to 0.5 per cent on anything over that.

Someone stashing the maximum £150 into this account each month could expect to earn £40.50 over the course of one year.

To open a regular saver with NatWest or RBS, savers will need to be a NatWest current account holder.

There's a catch: Yorkshire BS' regular saver is only available to those who either save or have a mortgage with the mutual and who have had a continuous membership for at least 12 months

There’s a catch: Yorkshire BS’ regular saver is only available to those who either save or have a mortgage with the mutual and who have had a continuous membership for at least 12 months

Yorkshire Building Society’s Regular Saver

Yorkshire Building Society has a regular savings account paying 5 per cent interest with customers able to deposit up to £500 each month, a higher limit than other options. 

This deal allows customers to start saving with just £10 and save up to £500 each month for one year. 

Someone depositing the maximum £500 each month over the course of one year could expect to earn £161 in interest.

However, the catch is that its regular savings deal is exclusively targeted towards its members.

It is only available to those who either save or have a mortgage with the mutual, and existing customers must have had a continuous membership for at least 12 months prior to applying for the deal. So savers can’t just set up an easy-access deal and immediately take advantage.

Members who qualify, can open the account in branches, agencies and online.

The Savings Guru verdict:

‘The best regular savings deals are offered by the big banks to existing current account customers. 

‘We wouldn’t suggest switching for them but they are definitely worth it for existing customers. 

‘Remember though, that rate will only be earned on what you have saved which, in the first few months, will be relatively little. 

‘Savers often mistakenly believe it is on the final balance. In the case of the Lloyds account, it’s likely that a saver will earn around £130 in interest for saving the maximum amount. 

‘Other good deals are NatWest at 5.12 per cent and First Direct at 3.5 per cent. 

‘The best deal not linked to a current account is the 2.55 per cent on offer from Skipton for easy access, so we’d recommend that option, particularly as we expect easy access rates to increase if, as expected, the Bank of England raises Base Rate to 3 per cent or 3.25 per cent on 3 November.’

Savings accounts

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