Small banks hand savers a lifeline despite two quickfire base rate cuts as best buy short fixed-rate deals appear… but they may disappear fast
- The Bank of England has cut its base rate from 0.75% to 0.1% in eight days
- This has led to a fear of a raft of savings cuts and best buy deals disappearing
- However at the end of last week top one and two-year fixed-rates appeared
- Savers should lock into these rates now before they disappear, senior bankers warn
Hard-pressed savers expecting the worst after two Bank of England base rate cuts in eight days have been handed a lifeline in the form of new top fixed-rate deals.
Three top one-year savings rates were launched late last week after last Thursday’s emergency cut, which took the bank rate to its lowest ever level of 0.1 per cent.
While this would be expected to lead to a round of cuts to the best savings rates, challenger banks OakNorth, Hampshire Trust Bank and Charter Savings Bank launched new top one and two-year fixed-rate deals.
Banks have thrown rate-starved savers a lifeline in the form of new top one-year fixed-rate deals
OakNorth launched one, two and three-year accounts paying 1.57 per cent, 1.66 per cent and 1.68 per cent.
The one and two-year deals are now the best rates available, while the best three-year is still Investec at 1.8 per cent.
Another challenger, Hampshire Trust Bank, launched a 1.55 per cent one-year deal which puts it in joint third place behind OakNorth and SmartSave, paying 1.56 per cent.
OakNorth and Hampshire Trust Bank’s deals can be opened with £1,000, and SmartSave £10,000.
Stuart Hulme, director of savings and marketing at Hampshire Trust Bank, said: ‘The rate increase on Friday was part of our usual cycle of business activity in the savings market, and we’re really pleased if it provides a little bit of good news for hard-pressed savers.
‘The one-year market is always very popular with savers and is well served by the challenger bank community.’
Meanwhile Charter Savings Bank launched a 1.51 per cent deal, putting it at the top of the chasing pack behind those three top deals and two other accounts paying 1.55 per cent.
The account can be opened by post or online with £5,000 and offers a monthly interest option.
The one-year fixed-rate market has actually held up fairly well considering the Bank of England has slashed 0.65 percentage points from its base rate, used to price mortgage and savings rates, in the last fortnight.
The previous top one-year deal, offered by Ikano Bank, was sliced from 1.56 per cent to 1.36 per cent after the emergency base rate cut of half a percentage point on 11 March.
This, along with the disappearance of some other top savings deals, could have led some to fear an impending collapse in savings rates.
However, that deal was quicky replaced by SmartSave and the three new accounts at the end of last week have helped bolster the one-year market for now.
The average one-year rate fell from 1.15 per cent at the start of the month to 1.09 per cent on 18 March, according to Savings Champion, while Moneyfacts found the average now sits at 1.1 per cent.
‘The one-year market does seem to be holding up relatively well at the moment’, Hulme added.
Tick tock: Savers have been urged to lock into top fixed-rate deals where they find them, because at the moment the best rates are unlikely to stick around for long
But savers should act now to secure top deals
However, savers happy to lock their cash away for a year to safeguard it should act quickly, as it seems inconceivable the Bank of England’s actions will not lead to providers pulling top deals.
Anna Bowes, the co-founder of Savings Champion, said ‘cuts are inevitable’.
Two senior savings bankers previously told This is Money that savers who find a top fixed-rate deal should lock into it very quickly.
Suzanne Lewsley, chief deposits officer at Ford Money, said: ‘Those thinking of squirrelling their money away into a fixed-term product should do so as soon as possible, as rates will likely fall in the near future.’
Meanwhile, a senior banker at another challenger bank said: ‘If I were a saver, and I didn’t need access to my cash, I’d be stashing in a one or two-year fixed rate product as soon as possible, as the current rates won’t hang around for long.’
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