UK savers can now access interest rates above 5% for the first time in over a decade and a half, if they are willing to put their money away for at least one year, though reports of a 9% savings rate from one challenger bank has been dismissed as unappealing in reality.
Saffron Building Society has launched a monthly Loyalty Saver' account offering an eye-catching 9% for members.
Members of the lender can deposit up to £50 a month for 12 months to achieve this rate but, as savings expert Anna Bowes, co-founder of SavingsChampion.co.uk, points out, the maximum interest anyone could earn on this account is £29.25.
The account has "limited appeal", she said in a blog, as savers will only earn the full 9% on the first deposit of £50, with all subsequent deposits only earning a proportion of the 9% as the money will only be in the account for a proportion of the year.
Paying £50 a month would result in £600 being saved in total, which Bowes recommended would be better used in one of the other savings accounts and one-year or two-year bonds that are now paying over 5% interest.
For savers that are willing to lock away their money for at least a year, there are more lucrative savings deals available.
Top of the list are two banks that operate using Islamic Sharia banking principles, which means savers get an “expected profit rate” rather than guaranteed interest.
QIB is offering 5.35% interest on savings of between £1,000 and £85,000, while Al-Rayan Bank offers 5.30% interest for savings of between £5,000 and £85,000, both on the Raisin platform, where savers with at least £10,000 can also achieve 5.25% with the National Bank of Egypt.
The first £85,000 of money saved with this trio and other lenders under the Financial Services Compensation Scheme (FSCS) is fully protected.
Locking your savings away for one-year you can get 5.25% from BLME, another Sharia bank, on the Hargreaves Lansdown Active Savings platform, or 5.1% directly with the bank.
Elsewhere, Kent Reliance, part of OSB Group PLC (LSE:OSB), offers a 5.2% rate of interest for its one-year bond, while Zopa, the former peer-to-peer platform turned savings bank, offers 5.01%, with the Paragon Banking Group PLC (LSE:PAG) savings arm offering just under 5%.
A one-year bond means savers have no access to their capital until the full 12 months are up.
With the Bank of England expected to raise rates further but then cut make some cuts next year, some savers might be interested in a two-year lockup.
For two-year savings bonds, Investec is offering 5.21% and Close Brothers 5.2%.
Bowes said fixed-term bond rates are influenced by expected Bank of England rates and are also driven by competition between banks.
She said higher fixed rates are likely to come with the next BoE hike, adding that "hardly a day passes without a new fixed-rate bond launch".