Summer battle to top fixed-rate savings tables heats up with second best buy boost from a challenger bank in under a week
- Charter Savings Bank now offering one-year fix with 2.06% rate
- More than half a dozen providers offering 1.75% or more over 12 months
- Fixed-rates have risen steadily during the summer
The summer has finally heralded a battle in the fixed-rate savings market with a challenger bank once again boosting its one-year deal.
Charter Savings Bank, which opened for business earlier in the year, has nudged the rate on its 12-month fix to 2.06 per cent, putting it back at the top of the independent This is Money tables.
It comes just days after it lost its crown to United Trust Bank, which hiked its 12-month rate to 2.05 per cent, as the tit-for-tat battle to stay market leader continues.
Rising sun: Charter Savings Bank has once again boosted the rate on its one-year fixed-rate savings account as the market begins to look sunnier for savers
The Charter Savings account can be opened with £1,000. Interest is paid annually and the account can only be opened and managed online. There is a monthly income option which comes with slightly less interest.
The Wolverhampton-based bank is covered under the Financial Services Compensation Scheme to the tune of £85,000, or £75,000 from next year.
It has also raised the rates on a number of its fixed-rate deals. The pick of the bunch is a three-year rate, which is being upped from 2.25 per cent to 2.65 per cent, making it a clear best buy.
And its domination of the This is Money fixed-rate savings tables don't stop there. It now tops the five-year tables, with a 3.05 per cent rate.
Paul Whitlock, director of savings, Charter Savings Bank said: 'We have seen a number of movements in market rates recently and as part of our commitment to offering the best rates we can to savers we have passed on those increases to our full range of fixed-rate bonds.
'Savers will not find a more competitive range of accounts anywhere else on the market today.'
Summer (savings) lovin': Charter Savings Bank - along with other challengers - have helped bring the feel good factor back in the fixed-rate savings market. Pictured, Danny and Sandy from 1978 film Grease
At the start of last week, James Blower – of independent website Savings Guru – told This is Money that fixed-rate rises would begin during the course of the summer because of a number of factors.
He also said at the start of May, only four banks (all foreign owned Al-Rayan, Bank of Baroda, Punjab and Firstsave) were paying above 1.75 per cent in the one-year fixed-rate deposit market.
Now, two months later, there are more than a dozen options for savers above 1.75 per cent if they fix for a year, as the feel good factor begins to creep back into the fixed-rate market.
The drive has been largely down to challenger banks laying down the gauntlet to bigger competitors, which hardly feature in the best buy lists.
James Blower - who was previously head of savings at Shawbrook Bank - adds: 'Challengers are battling in the shorter-term markets as this is the cheapest place for them to acquire the largest volume - 12 month deals make-up approximately half of the fixed-term deposit market.
'Rates are rising because there are so many of them trying to raise customer deposits and very few of them have built a brand or proposition so are competing purely on rate.
'Therefore, when they are not in the top two or three, they don't get the level of funding they need so they raise rates again.'
It is also creating a widening gap between run-of-the-mill fixed-rate accounts and fixed cash Isas, which have seen little movement.
The top 12 month tax-free fix is 1.65 per cent, offered by Shawbrook Bank.
It comes after Money Mail savings expert Sylvia Morris said last week that savers can actually end up with more interest by abandoning their cash Isa and opting for a one-year fixed-rate bond instead, with improving rates.
The unusual chance to earn more in a high street account than an Isa comes because from next April savers will be able to earn £1,000 interest a year tax-free.
When the current top rate one-year bond has its interest paid, for most savers every penny earned will qualify for the new tax perk.
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