Bank hikes interest across three savings accounts to over 4%

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Atom Bank has made the move to increase the interest across three fixed rate savings accounts to offer a better rate of return. All three accounts are now paying an Annual Equivalent Rate (AER) of over four percent and savers can get started with just £50.

Fixed rate savings accounts can add another layer of certainty to savings, as savers are able to lock in the rate at the time of opening the account.

This means the bank or building society cannot change the interest rate during the term of the bond, which works well for account holders hoping to save long-term.

Atom Bank’s two year, three year, and five year fixed rate each now pay an AER of 4.45 percent, placing each in the top three of the Moneyfacts Best Buy leaderboard of fixed rate savings accounts.

Savers can opt to have interest paid on the anniversary of the account opening or monthly, and withdrawals are not permitted during the term of the bond.

All the accounts can be opened and managed through Atom Bank’s mobile app and savers must be 18 years old or over.

However, while savings rates are typically influenced by the Bank of England Base Rate (currently 3.5 percent), many may be wondering if there is any point in opting into a fixed term account now if the Base Rate is likely to change again soon.

Financial journalist Martin Lewis addressed the question on The Money Show last night, saying savers shouldn’t see a Base Rate rise as a “done deal” that fixed savings account rates will rise with it.

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He explained to viewers that while easy access rates move with the Bank of England Base Rate, fixed rates move with guilts or the long-term predictions of interest rates instead.

Mr Lewis continued: “Because things have calmed down since last September’s budget, long-term interest rates are now predicted to be lower.

“Actually, at the last Bank of England announcement, while it put rates up, they forecast future interest rates to be lower and we didn’t see any increase in fixed savings rates at all.

“You shouldn’t see it as a done deal that if the Bank of England puts rates up, fixes will go up. Therefore, I don’t think it’s such a big deal to lock away now.”

Mr Lewis added: “You could wait, but what I would say especially if a fix is right for you and you’ve never fixed before and you’re an inactive saver who doesn’t normally do it, I would suggest now would be a good time to fix.”

Analysing the Moneyfacts Best Buy leaderboard for two year, three year and five year fixed rate savers, while Atom Bank tops the list for two year fixes, Smartsave and Monmouthshire Building Society take the top spots for three and five year fixes.

Smartsave tops the three year fixed rate account list with an AER of 4.51 percent on a minimum deposit of £10,000. Interest is compounded annually and paid on maturity, and withdrawals are also not permitted.

Monmouthshire Building Society takes the lead on fixed rate savings accounts of four or more years with an AER of 4.5 percent.

This account requires a minimum deposit of £1,000, interest is paid yearly, and withdrawals and early closures are not permitted.

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