Charter Savings Bank has improved the rates on its fixed-rate savings accounts giving it a clean sweep across all fixed-term accounts on This is Money’s independent best-buy tables.
The challenger pays 1.6 per cent on its one-year bond, 0.1 per cent higher than the closest rival deal from Atom Bank – but unfortunately lower than the current rate of inflation which was revealed at 1.8 per cent this week.
Its two-year rate of 1.75 per cent, three-year deal paying 1.85 per cent and five-year fix at 2.16 per cent all beat rival deals by a similarly fine margin.
Fixed rate: Locking your cash away could be savers’ only chance of beating rising inflation
Those looking for a five-year fix could find a higher rate from BLME and Milestone Savings, paying 2.3 per cent and 2.25 per cent respectively.
However both are Shariah compliant providers and therefore these accounts offer ‘expected profit rates’ rather than guaranteed returns.
Alongside the rate improvements, Charter Savings Bank has also launched both a new 18-month and four-year fixed deal paying 1.65 per cent and 2.06 per cent respectively.
The 18-month fix beats the previous best buy offer from Harrods Bank which pays 1.4 per cent.
It is also more profitable than all-but-two of the top deals on two-year bonds in This is Money’s best-buy tables (Atom Bank and Charter Savings Bank’s own account).
Does this mean change is on the horizon?
While the boost to rates is nothing to write home about, the incremental increases to deposit rates represent a glimmer of hope for savers struggling to find returns.
Rates have begun to climb slowly in recent weeks.
Earlier this week, Moneyfacts research revealed that after 15 consecutive months of cuts, in January savers saw more banks boost interest than the numbers of providers who reduced rates on their savings products.
Although there is a slight improvement in best-buy savings deals compared to current deals, savers are still worse off than they were six months ago.
In August last year, for example Charter Savings Bank in fact offered a one-year bond paying 1.66 per cent, while its 18-month account paid 1.7 per cent.
Any increases in rates are also most likely mostly down to increased competition among challenger banks, rather than a turnaround in the savings market.
Rachel Springall, finance expert at Moneyfacts says: ‘Challenger banks have really ignited some much needed competition into the savings market and can be an attractive alternative to the more familiar brands who offer poorer returns.
‘It’s clear that the challengers have more capacity to offer attractive savings rates than the big banks as they are likely to desire deposits for long-term funding requirements. As with any great deal, savers would be wise to act fast as a good rate won’t always be around for long.’
This week, figures also revealed that the cost of living in January rose to 1.8 per cent, meaning despite slight rises in rates earnings from savings pots are being heavily eroded by inflation.
Savers would have to lock their cash away for over three years to find an account that outstrips inflation.
Committing to a five-year fix doesn’t provide much more profit. Charter Savings Bank’s now best-buy offer pays interest just 0.33 per cent above the CPI inflation figure.
Springall adds: ‘Most of the new deals that have surfaced this year pay rates that are below the current level of inflation, but they can still earn a position among the best accounts – showing that providers don’t need to work very hard to maintain a competitive position in the Best Buys.
‘Savers are clearly running out of options for an inflation-beating return, unless they lock their cash away for the long term or are prepared to place their funds in more riskier investments.
‘A year ago savers had 118 fixed deals on the market to choose from that paid a respectable 2 per cent or more, but this has eroded to just 11 accounts – all of which require savers to tie their cash in for five years or more.’