Neobanks Lead the Charge on 3% Savings Rates
“You could always lead an army of overweight elephants across the gap between inflation and savings rates.”
Image source: Lensi Photography/Starling Bank.
Inflation rates hit double digits for the first time in forty years last week, base rates rose to 1.75% at the start of the month and now, unsurprisingly, savings rates continue to rise. increase.
After the Bank of England’s historic 0.5% base rate increase, 12-month rates are now above 3%, with best rates at 3.15%.
Allica Bank, Paragon Bank and Shawbrook Bank are among 10 banks that have raised rates above 3%, according to Hargreaves Lansdown, as rates are expected to keep rising.
“Higher inflation is bad news for savers because despite recent rate hikes, you could still lead an army of overweight elephants across the gap between inflation and savings rates,” he said. said Tom Higham, acting head of savings at Hargreaves Lansdown.
“This means that the purchasing power of our money is gradually being eroded by rising prices, so we need to make sure we are getting the best possible rate on every tranche of our savings.”
Allica is currently sitting at 3.05% on a 12-month bond, with Shawbrook and Paragon at 3% on 18-month bonds.
According to Hargreaves Lansdown, rates are likely to continue to rise as banks compete for position with the best rates.
Inflation is also expected to reach 13.1% this fall, so the pace should continue.
It is “very likely” that rates will rise further during the year, leading to higher interest rates, according to Higham.
Although the rates are still a long way from matching the rate of increase in inflation, this is at least helping to close the gap.
“You can’t keep up with inflation in a savings account right now, but there’s a world of difference between languishing in an account with a high street giant paying 0.01% and transferring it into a bank offering nearly 2%,” Higham said.