Savings rates have been increased by both Zenith Bank and Coventry Building Society in recent days, with an ISA and regular savings account making Moneyfact’ “Pick of the Week”. The highest paying account comes from Zenith, which is offering a 1.85 percent interest rate.
Eleanor Williams, a Finance Expert at Moneyfacts.co.uk, commented: “Among the accounts to receive a rate increase from Zenith Bank (UK) Ltd this week is the three Year Fixed Term Deposit. Rising by 0.03 percent this now pays 1.85 percent on anniversary and could be an attractive option for savers who are happy to lock their savings away for a set period in order to receive a guaranteed return.
“Savers need to be happy to commit at the outset as neither further additions nor early access are permitted so careful planning is advised. On assessment, the account receives an Excellent Moneyfacts product rating.”
Those looking for a tax efficient way to save can also benefit from Coventry Building Society’s new ISAs.
Ms Williams continued: “Coventry Building Society has launched a new range of Fixed Rate ISAs this week, including a market-leading one-year option.
“Paying one percent yearly, this deal enters the top rate tables and may tempt savers yet to utilise their ISA allowance. Not only does the deal offer an attractive rate, but savers who may wish to access their pot in an emergency can do so, subject to a 120-day loss of interest penalty.
“Further additions can also be made for 14 days from account opening or as long as the issue remains open, which could be useful for those who may experience a delay between making a simple cash deposit or an ISA transfer. Overall, this account receives an Excellent Moneyfacts product rating.”
While these increases will be welcomed, it should be remembered that average rates across the board remain at rock bottom levels and many experts believe banks will be slow in passing on the base rate increase to savers.
As such, financial experts such as Ms Williams and Martin Lewis regularly advises savers to switch accounts often where better deals can be found. This may prove especially important at the moment as new research from Paragon Bank showed average balance levels have reached record highs.
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According to Paragon Bank, the total savings stock recorded on CACI’s database, which captures savings data from more than 30 leading providers, grew by 8.3 percent between March 2020 and September 2021, climbing from £903billion to £978billion.
The average balance reached a new high of £12,237 – an increase of over £1,000 since March 2020 where it stood at £11,141 and a slight increase on August.
In terms of where this money is held, easy access non-ISA balances have been a key driver of the savings category growth and continued to be on an upward trajectory in September, and are now standing at £597billion, accounting for 61 percent of the entire savings market.
In contrast to the easy access market, the fixed term market has continued to see its value reduce throughout the pandemic. Fixed term non-ISAs stand at a value of £71.7billion, down from £92.7 billion at the start of the pandemic, a reduction of 22.7 percent.
“This is despite rates picking up across the board and best-buy deals currently offering people the opportunity to earn at least six or seven times more interest than they currently are in a low-paying account.
“Our analysis shows that a large portion of savings are still languishing in current accounts earning little to no interest, with that category also seeing significant growth during the pandemic.
“Our advice to savers is to use the festive period and new year as an opportunity to take stock of their finances and check what rates they’re receiving on their savings, moving money away from low paying accounts.
“It’s key for people to look for the best deal and to ensure they are maximising returns on their money.”