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It’s finally possible to secure an inflation-busting interest rate with a host of deals paying five percent or more. This opportunity may not last much longer, warns Victoria Scholar, head of investment at Interactive Investor, as the Bank of England could start cutting base rates from today’s 5.25 percent in the spring.
Anna Bowes, head of savings rate tracking service Savings Champion, is urging savers to take advantage of today’s best buy savings rates sooner rather the later.
“Market sentiment is clear that rates will fall going forward, although the recent pause does appear to have slowed the pace of the rate cuts.”
Bowes added: “There are still plenty of inflation-beating accounts available to choose from at the moment, so it’s time to review and to switch.”
There have been “more downs than up in the savings rate table”, she added, with Earl Shilton, Charter Savings Bank and Kent Reliance all withdrawing table-topping rates.
“Luckily, Coventry Building Society has launched the latest issue of its Triple Access Saver (Online) 2, which is paying 5.15 percent, so beating the lot of them to take top spot.”
This rate is available on a minimum deposit of just £1 and a maximum of £250,000. Like most best buy savings accounts, it can only be opened online.
As its name suggests, the account only allows three penalty-free withdrawals per annum. Any further withdrawals will be subject to a 50-day loss of interest.
Bowes added: “Today’s best buys often don’t last long, so if you spot a top rate go for it.”
Ulster Bank does pay a slightly higher rate of 5.20 percent, but this is only available to existing customers who have a linked current account.
By contrast, Coventry’s deal is available to all.
Leeds Building Society also offers a competitive easy access account that pays only slightly less at 5.10 percent. The advantage is that there is no limit on withdrawals.
The minimum opening balance is £1,000 with a maximum of £1million.
Close Brothers also pays 5.10 percent but savers need a minimum of £10,000. The maximum deposit is £2million.
Challenger bank Cynergy Bank pays 5.10 percent on a minimum of £1. The maximum deposit is £1million.
Again, it’s online only.
The downside with variable rate easy access accounts is that the interest rate paid is likely to fall the moment the Bank of England cuts base rates, which could be as soon as May.
Savers can get round this by locking into a fixed-rate bond instead. A number still pay more than five percent for one and sometimes two years.
Allicca Bank currently pays a best buy fixed rate of 5.20 percent for 12 months, on between £10,000 and £250,000.
While an unfamiliar name, the first £85,000 is protected under the government-backed Financial Services Compensation Scheme, offering peace of mind.
The SmartSave 1 Year Fixed Rate Saver pays 5.18 percent on balances between £10,000 and £85,000.
Shawbrook pays 5.18 percent fixed for one year.
READ MORE: Savings alert as accounts breaching tax thresholds triple in one year
With inflation at four percent in the year to December and expected to fall further, all of these savings accounts currently offer a positive real return.
Savers who can fix their money away for longer can also get more than five percent from a two-year fixed-rate bond.
The iFAST Global Bank pays 5.10 percent a year fixed for two years, according to Moneyfacts, with FSCS protection up to £85,000.
GB Bank pays 4.96 percent for two years, via the Hargreaves Lansdown Active Savings platform. The minimum deposit is £1,000, with a maximum of £2million.
Those who would like to fix their money away for five years will have to accept a lower rate, although they are guaranteed to get it for much longer.
Işbank pays a fixed rate of 4.50 percent a year for five years, in an account available via the Raisin UK savings platform.
The minimum deposit is £1,000 and the maximum is £85,000.
Işbank pays the same rate over seven years, too. This would give savers 4.5 percent a year all the way through till 2031.
Of course, nobody knows what will happen to inflation in that time but this may tempt far-sighted savers. A combination of short and long-term fixture bonds may be best but don’t waste time if one of them takes your rancy.