Money-saving expert Martin Lewis opened the cover of savings accounts on his show this week.
On ITV’s weekly Martin Lewis Money Show, the financial journalist tackles questions from wallet watchers across the country, and tonight he had some top savings account tips.
On Thursday night he pointed out that peak interest rates on savings had more than doubled since March – so now is the perfect time to “make sure that every penny pays off”.
“The top savings rates have improved massively lately, I’m still not saying they are great, but they have risen sharply. In March the top savings account paid 0.4%, now it pays 0.67% – So that’s the same interest and more than half as much on top.
“The top two-year fixation was only 0.74%, now it pays 1.6%, more than double what it paid. The reason those rates are up now is because the long-term projections of rates have gone up, and that is what they are set for, and there is competition in this market more than it was before.
“But what’s fascinating to me is that if we go back a year and a half, fixed rate saving and easy access saving paid roughly the same, but that gap has widened so fixed rates are now massively more competitive than that easy access is a good bet.
“The problem with all of this, however, is that none of these rates even come close to inflation. So my big appeal to anyone watching is if you have savings, check out what interest rates you are paying, and then compare them to the interest rates that I am going to talk you through. “
Help with saving
Martin first spoke about his selection for “unbeatable” interest rate savings accounts, starting with the government’s “Help to Save” program.
“These are the unbeatable interest rate accounts – if you can, you should – for those on a low income, for example, if you have a universal loan, there is a system of government aid to saving.
“Here you can deposit up to £ 50 per month in over two years and you will be paid a bonus – 50% on the highest amount you have. So if after a year you say you have £ 600, you have a problem and need the cash that many low-income people will find so they don’t deposit anything for the rest of the two years.
“Because the highest amount you had was € 600, 50% of which is € 300 – this is the bonus you get, absolutely unbeatable winner.”
Lifetime ISA (LISA)
“The Lifetime ISA for first-time buyers is very similar,” said Martin.
“If you are between 18 and 39 and are buying a qualifying home for the first time, which is pretty much any residential home that costs less than £ 450,000, you can receive a 25% bonus on your savings.
“You can deposit up to £ 4,000 per year so the maximum bonus is £ 1,000 every year. The best Lifetime ISA is with Moneybox at 0.6%. You need to read a little more, but absolutely first time buyers or those who are thinking about it this is a very good place to save. ”
The best fixed rate savings accounts right now
Fixed interest rates mean that you lock up your money and cannot access it during that time, so you need to be aware – these accounts usually pay higher interest rates because they can guarantee that your money will be held for a longer period of time.
Martin said, “The best annual fixed rates right now? Zopa – 1.35%, you can get a fixed cash ISA too, you pay less – Hampshire at 0.95% – you can withdraw from a cash ISA, but You pay a hefty interest penalty for doing this.
“Top two year fixes – SmartSave 1.6% but a minimum deposit of £ 10,000 so Zopa is a little less at 1.59% but only a £ 1,000 minimum deposit. Top Cash ISA pays a lot less there again – Close Brothers with 1.2 %.
“This may surprise you now, but UK-based Islamic banks – which are so fully regulated in the UK, have full savings, are Sharia compliant, pay more – Al Rayan’s one year fix is 1.45% with a minimum deposit from £ 5,000, two years is 1.76%.
“But it’s not interest – because you can’t have interest under Islam – it’s the expected profit, even though no British Sharia account has ever failed to pay me the full interest rate.
“So you might want to access it – you don’t have to be a Muslim to do it and they pay higher prices and if everything goes according to plan you would get more that way.
“You may think you could fix for longer – you’re right, you can get a 5 year fix that pays off over 2% but with the prediction that if you’re tied to it, interest rates could go up for five years 2%, in a few years you might look back and think why I locked myself in. So it’s a tough decision, but go online and find the best prices. “
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