Want a great savings rate? It’s time to “notice” these accounts…

Thursday, 25 June 2015

Over the last few years, savings rates have been on a general downward trend. You’ve probably noticed this first-hand, and it could be having a dramatic impact on the level of interest you receive from your hard-earned savings pot. Well, we have a bit of good news for you – despite the majority of average rates falling or remaining static in the last month, rates on notice accounts have bucked the trend and are actually increasing!

Notice account rates at two-year high

Figures from Moneyfacts show that the average notice account rate has risen for the third consecutive month, and it’s managed to reach a two-year high! It now stands at 0.81%, up 0.02% from May’s figure of 0.79%, marking the highest level recorded since June 2013.

Happily, this sector of the market has seen gradual improvement for much of the last year – it may be the only one that has, but anything is better than nothing! Notice accounts could be perfect for those who don’t mind a bit of active management when it comes to their savings, as all withdrawals have to be planned in advance.

Unlike with an easy access account, you can’t just withdraw your cash on a whim – some notice accounts permit earlier access, but this generally comes with an interest penalty – which makes notice versions suitable for those who need that kind of restriction to keep their savings pot intact. They shouldn’t be used for an emergency fund, but if you’re saving for something specific and don’t mind a few restrictions, you could benefit from far better rates.

Even the average rate is just that, an average, and you could get far better deals if you take the time to shop around (up to 1.91%!). Happily, these rates seem to be rising on a regular basis, but why the improvement? Well, analysis suggests that much of it could be due to the growth in challenger banks, with many of these newer brands having a key presence in the notice account sector.

Give challengers a try

Challenger banks – and by that we mean newer banks that aren’t big names and perhaps don’t have a high street presence – have come to dominate our best buy charts, and they have a particular focus on this sector of the market. Several of these fledgling brands have launched new products or increased rates in recent weeks: GE Capital Direct and Secure Trust Bank have both launched 120-day notice accounts in the last month, while Hampshire Trust Bank increased the rate on its 90-day notice version to secure the top rate for its term.

If you’re not familiar with these names, don’t worry – many people aren’t! But, that doesn’t mean you shouldn’t consider them. They typically offer far better rates than their high street counterparts, so if you’re sticking with your bank out of loyalty, it could be time for a change.

Our analysis shows that many of the biggest high street banks – think Barclays, Halifax, HSBC, Lloyds Bank, Nationwide, NatWest, RBS and Santander – offer pitifully low savings rates, all because there’s a lack of motivation for them to compete. Arguably, this could be the result of the Funding for Lending Scheme, launched in 2012 to offer banks access to cheap funding that they could lend out, which meant they had no need for savers’ cash to boost their funding reserves.

As a result, savings rates fell – and they fell quickly. However, challenger banks didn't take part in the scheme. Many weren’t even around when it was launched, so they still need to rely on customer deposits to balance the books. It’s therefore unsurprising that they’re actively competing and are offering much higher rates.

Top picks

Want to check out the top accounts on the market? Here are just a few you may want to consider – and all of them come from lesser-known names. Give them a try!

  • 120-day notice
AER Notice / Term Minimum Investment Account Opening

120 Day Notice (Issue 13)
1.91% 120 Day £1000
  • Online

AER Notice / Term Minimum Investment Account Opening

GE 120 Day Notice
1.65% 120 Day £500
  • Online

  • 95-day notice
AER Notice / Term Minimum Investment Account Opening

95 Day Notice Issue 3
1.65% 95 Day £1000
  • Online

AER Notice / Term Minimum Investment Account Opening

95 Day Notice Personal Savings Account Issue 17
1.65% 95 Day £1000
  • Online
  • Postal

  • 90-day notice
AER Notice / Term Minimum Investment Account Opening

90 Day Notice (Issue 6)
1.60% 90 Day £1000
  • Postal

  • 30-day notice
AER Notice / Term Minimum Investment Account Opening

30 Day Notice Cash ISA Issue 5
1.25% 30 Day £1000
  • Online
  • Postal
  • Phone