Top savings expert ‘amazed’ as this one-year bond pays 3.30% – ‘nev…

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Savers have been waiting for more than a decade for banks to start paying decent returns on cash, and now it is finally happening. The downside is that as inflation rockets, the value of savers’ deposit are still falling in real terms.

The only thing savers can do to protect themselves is to shop around for the best possible rate, but they also face a tough choice.

Do they lock into a best buy rate today, or hold off in the hope that they will be able to get an even better deal in a month or two?

The Bank of England has increased interest rates five times since December, from 0.10 percent, to today’s 1.75 percent.

It is expected to increase base rates again at its next meeting on September 15, possibly to 2.25 percent.

When that happens, savings rates will inevitably rise again. The problem with waiting is that it means you will miss out on today’s top rates, and get less in the short run.

Yet one savings expert has a solution.

Andrew Hagger, banking expert at MoneyComms, is urging savers to spread their money across different accounts to take advantage of the growing number of best buy deals as deposit rates continue to climb.

Today’s top easy access account from Shawbrook Bank pays 1.86 percent, with Paragon Bank close behind at 1.80 percent and Nationwide Building Society paying 1.75 percent, figures from Moneyfacts show.

Anybody who has an account getting 0.10 percent or less with one of the big four high street banks Barclays, HSBC, Lloyds or NatWest should move on to get a better rate today.

The appeal of easy access accounts is that you can get at your money any time you wish, and move it elsewhere when you spot a better deal, Hagger says.

Yet you can get an even better return from a notice account, while retaining some flexibility to move your money as rates rise.

Hagger highlights Investec Bank, which pays a market-leading interest rate of 2.10 percent with 90-days notice.

Yet some of the most impressive rates today are paid by one-year fixed-rate bonds. “Investec Bank and Tandem Bank have both just launched one-year fixes paying 3.30 percent, while Shawbrook pays 3.26 percent.”

Hagger says that just 12 months ago, the best one-year bond paid less than half that amount, with Tandem Bank giving savers 1.41 per cent.

This time last year, the average one-year savings bond paid just 0.60 per cent, Moneyfacts says. Today, the average is 1.97 per cent.

Average rates have more than tripled, Hagger says. “I’m stunned by the increase. No way I saw this coming 12 months ago, and I doubt anyone else did, either.”

Additionally, fixed-rate bonds pay even more if you can lock your money away for a longer period, but now the difference is minimal.

Monument pays 3.46 percent fixed for two years, with JN Bank paying 3.35 percent.

Five-year fixed-rate bonds typically pay the highest rates but now they offer only slightly more, as Aldermore’s best buy savings account pays 3.50 percent.

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This suggests banks expect interest rates to peak next year, then fall back as inflation is brought under control.

Yet savings rates are rising by the day and that will continue as the Bank of England hikes base rates again and again to curb inflation.

Savers face a tough choice between snapping up a top rate today or getting an even better one in a month or so.

Waiting for the perfect time to lock into a savings rates could backfire, by handing you a poor return right now, but Hagger has a solution.

He suggests adopting a mix and match strategy, by splitting money between different accounts over different terms.

“If you put a third of your cash savings in instant access at 1.86 percent, a third in a 90-day notice account at 2.10 percent and a third in a one-year bond paying 3.26 percent, your overall rate is 2.40 percent.”

Better still, you have freedom to move your money as rates rise. “You can move your money out of an easy access account without penalty at any time, and shift money out of the notice account in 90 days, if you wish.”

Becky O’Connor, head of pensions and savings at Interactive Investor, said: “For long-term savings, you might get a better return from the stock market.”

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