Savings rates have topped seven percent for the first time in over six years forcing providers to race to increase their fixed rate offers.
Following the recent saving frenzy, the top rate available has risen by over 0.35% in the last two weeks alone and has seen over 20 providers increase their fixed rate offers. In addition, the recent news that Victoria Mortgages has gone into administration and the increased LIBOR rate has also confirmed the banks’ cautious attitudes to lend to each other.
Since the start of the year, rates have risen by over 1.5%, and the last two months alone have seen almost a 1% rise. But while this is good news for savers looking to snap up a great rate, lenders are now seeking ways to fund their mortgage lending, with increasing deposits looking likely as the first port of call for many.
Rachel Thrussell, Head of Savings at Moneyfacts.co.uk, comments on the latest increase: “It’s been quite some time since we have seen the market move at such a pace. In just two weeks an investor looking to secure the best fixed rate deal would have missed out on £35 interest on an investment of £10K over one year.
“With little to differentiate between fixed rate bonds, rate really is the key feature and with so many providers desperately seeking the top spot in the charts, there is a fiercely fought contest to win our savings.”
With savings rates peaking at such a high level, it appears that the traditional advice from experts to overpay as much as possible on their mortgages as often as possible may not be of much use. However, those who were lucky enough to secure a cheap rate mortgage could look to invest in a 7% one-year bond, meaning they can make one off lump sum payments if the mortgage permits.
Rachel Thrussell continues: “A return of 7% is quite outstanding. It’s a great time to review your finances and bag yourself a great deal. But with rates also still remaining competitive in the ISA market, savers would still be wise to explore their tax-free options first.”
Find out who currently offers the best deals on saving accounts