Fixed rate ‘savings war’ continues to unfold: Zopa Bank are the latest to take top spot – will deals head higher still?
- Best two and three year fixed rate deal now 1.67% and 1.76% respectively
- Average three year deal is up by 0.3% since the start of this year
- One year fixed best buys also up almost daily – currently 1.41%
The fixed rate savings mini-war between challenger banks is continuing apace this week as they jostle for the top spot on the best buy tables.
Zopa Bank became the latest provider to up its rates across all its fixed term offerings becoming the market leader for two, three and five-year deals.
It increased its two-year deal from 1.57 to 1.67 per cent whilst its three-year rates rose from 1.67 to 1.76 per cent meaning it is now leading the market by 0.11 and 0.09 per cent respectively.
In January the average one year fixed rate deal was 0.50 per cent – now the average is 0.66 per cent.
The average three year fixed rate deal is now 1 per cent, according to Moneyfacts, 0.3 per cent higher than the start of this year in signs of a recovery from the rock bottom rates experienced during the pandemic.
It also offers savers some form of return compared to the billions stashed away in bank accounts earning as little as 0.01 per cent.
Someone opting to deposit £1,000 with Zopa via its two-year deal would have a balance of £1,034 after 24 months.
Whereas someone leaving their savings languishing in 0.01 per cent easy access rate for two years will end up with just 20p.
One-year fixed rate deals also experienced another wave of activity with four providers upping rates.
Zopa Bank increased its rates from 1.34 to 1.4 per cent, just shy of the market leader, Smartsave Bank, which increased its rates from 1.36 per cent to 1.41 per cent.
|Type of account (min investment)||0% tax||20% tax||40% tax|
|Smartsave Bank (£10,000+)||1.41||1.13||0.85|
|Zopa Bank (£1,000+)||1.40||1.12||0.84|
|Allica Bank (£10,000+)||1.38||1.10||0.83|
|Zopa Bank (£1,000)||1.67||1.34||0.00|
|Allica Bank (£10,000+)||1.66||1.33||1.00|
|Tandem Bank (£1+)||1.57||1.26||0.94|
|Zopa Bank (£1,000+)||1.76||1.41||1.06|
|Tandem Bank (£1+)||1.67||1.34||1.00|
|Smartsave Bank (£10,000+)||1.66||1.33||1.00|
|Zopa Bank (£1,000+)||1.81||1.45||1.09|
|United Trust Bank (£5,000+)||1.75||1.40||1.05|
|Atom Bank (£50+)||1.71||1.37||1.03|
Why the savings rate wake-up?
There have been more than 400 rate rises since the start of last month as banks compete to top the best-buy tables, according to research by website Savings Champion.
Only on Monday this week, two-year and three-year top spots changed hands four and five times respectively during the day.
James Blower, founder and interim savings director at The Savings Guru said: ‘We are seeing a savings war unfolding, but there’s limited participants and the wider market isn’t increasing in line with them yet.
‘What we are seeing is a large number of smaller savings providers, some of whom are newer entrants to the market, competing hard for top positions.
‘They are largely rate dependent because they have little brand recognition and haven’t built a name in the market that engages with savers on anything but price.
‘As there’s a few of these currently needing to attract cash from savers, this is why we are seeing so many changes in the top spot.’
Should you lock into a rate now?
Savers will be wondering if they should hold off locking up their cash in case rates rise further.
There are some signs of providers beginning to pull deals, suggesting we may be nearing a ceiling.
|Deal||Average rate in January||Average rate today||Number of deals in January||Number of deals today|
|1 year fixed rate||0.5%||0.66%||136||170|
|2 year fixed rate||0.58%||0.75%||121||156|
|3 year fixed rate||0.70%||1.00%||83||98|
|5 year fixed rate||0.89%||1.19%||56||82|
For example, DF Capital, has just pulled its 18 Month and 3 year fix and Blower is also expecting Wesleyan to be out of the market before the month end.
‘This will take some of the heat out and, when that goes, we will probably see a small fall back in rates,’ said Blower.
‘While it’s possible we will see a few more moves above current levels, I personally feel we are nearing the peak so my advice for savers is to either secure one of the rates on offer or watch very closely in the coming days and secure anything which breaks out from current price points.’