A new trend is taking hold among savers, banking experts tell me, and it’s one that has my seal of approval.
Savers are finally keeping their money longer to get the best rates before they disappear.
Since fixed-rate bonds and Isas came back into the spotlight a couple of years ago, the one-year version has been the favourite.
As interest rates continued to rise, savers – understandably – were unwilling to commit any longer.
Rising living costs also made savers nervous about setting aside their savings in case they needed it to pay bills.
Better rates: Savers are finally keeping their money longer to get the best rates before they disappear
Now, savers are piling into two-year fixed rate deals to ensure their money continues to beat inflation for longer.
But with the inflation dragon appearing to have been slain and the growth rate falling to the magic 2 percent target in recent data, there is a risk that savings rates could similarly plummet.
Earlier this year, money markets predicted a series of base rate cuts starting in March.
But inflation fell more slowly than expected and the base rate remains stuck at 5.25 percent after ten months.
However, all signs point to an imminent fall in interest rates and markets expect the Bank of England to cut rates sharply in August.
Until now, competition between banks and building societies has kept interest rates quite high for bonds and Isas.
As I predicted last week, cash Isa interest rates continue to rise – the best one-year rate is now Shawbrook’s 4.93 per cent.
Top one-year bonds pay more than 5 percent, with 5.21 percent direct from Vanquis Savings or Ziraat Bank via savings platform Raisin leading the way.
But two-year bond rates are hot on their heels. Close Brothers Savings and Vanquis pay 5.06 per cent and Access Bank pays 5.05 per cent.
The two-year version might prove to be a better option than opting for a one-year bond if you plan to renew within a year.
It would take 4.8 percent next year on a one-year bond to top the 5 percent two-year yield now on sale, which seems unlikely.
For those who want a longer-term bond and don’t need to access the money during that time, choose one that pays interest annually rather than accumulating it at the end of the term. You can then use your personal savings allowance for interest each year.
Otherwise, opt for a fixed rate Isa. Top two-year rates sit at just over 4.6 percent, with United Trust Bank and Close Brothers at 4.67 percent and Secure Trust and Cynergy Bank at 4.66 percent.
Sainsbury’s sale is an opportunity to abandon ship
Sainsbury’s Bank to sell savings division with £2.6bn customer deposits to NatWest
A warning to all Sainsbury’s Bank customers: it’s time to think about switching to a new bank.
It is to sell its savings division with £2.6bn of customer deposits to NatWest, with the deal expected to go through in the first half of next year.
If I had an easy access savings account or cash Isa at the supermarket bank, I wouldn’t be waiting around for rates to improve once it’s owned by NatWest.
Sainsbury’s Bank offers rates so low that every month you stay there could cost you dearly.
For example, its Cash Isa fell from 4.4 per cent last month to 3.5 per cent for new customers at a time when other providers were raising rates.
Rates on older variable rate accounts are terrible and vary wildly depending on when you opened yours; most are terrible and as low as 1.45 percent.