Don’t wait too long to pick up the rates from the challenger banks

7th July 2015 by Anna Bowes

United Trust Bank has launched new versions of its 18 month and 1 year fixed rate bonds, with increased rates from the previous versions. The 18 month bond has improved from 2.00% to 2.05% gross/AER and the 1 year bond from 1.90% to 2.05% gross/AER.

Last week began with this eye-catching improvement, resulting in the first 1 year bond paying higher than 2.00% in nearly a year, the last of which was Kent Reliance (2.01%) in August 2014. Up to this point, most of the action in this category has taken place in the battle for second place behind the longstanding best buy from Punjab National Bank (2.00%), with Charter Savings Bank the closest in recent times, when it moved its offering in line with the account. Another example of a challenger bank pushing the interest rates up and throwing down the gauntlet in the short term bond market.

Later in the week, Vanquis Bank launched improved versions of its 1, 2 and 3 year fixed rate bonds. The 1 Year Fixed Rate Bond is paying 2.01% gross/AER (the previous version was 1.86%), the 2 Year Fixed Rate Bond is paying 2.26% gross/AER (the previous version was 2.11%) and the 3 Year Fixed Rate Bond is paying 2.51% gross/AER (the previous version was 2.46%).

Two weeks prior to this change, Vanquis made extensive improvements to its fixed rate bond range, resulting in an appearance in the top five bonds for each of the main terms (1 to 5 years). As a result of a flurry of improvements amongst fixed rate bonds, the provider lost some of these positions, so has now responded positively. With these changes, along with the unchanged 4 and 5 year best buy bonds, Vanquis is once again competitive across the board, sitting comfortably in the top three bonds for each of the terms.

Charter Savings Bank has launched new versions of its 1, 2, 3, 4 and 5 year fixed rate bonds, with improved rates from the previous versions. The 1 Year Fixed Rate Bond is paying 2.06% gross/AER (the previous version was 2.00%), the 2 Year Fixed Rate Bond is paying 2.25% gross/AER (the previous version was 2.16%), the 3 Year Fixed Rate Bond is paying 2.65% gross/AER (the previous version was 2.25%), the 4 Year Fixed Rate Bond is paying 2.75% gross/AER (the previous version was 2.35%) and the 5 Year Fixed Rate Bond is paying 3.05% gross/AER (the previous version was 2.50%).

One of the last changes of the week and Charter Savings Bank appeared to have left the best until last, with 4 out of the 5 new bonds market leading. One of the most proactive of the Challenger Banks since its launch in March this year, Charter Savings Bank has once again made itself noticed with these changes, dominating the fixed rate bond best buy tables. Each of the accounts sits at the top for the respective terms, apart from the 2 year bond which sits behind Punjab National Bank (2.30%) and Vanquis Bank (2.26%).

Whilst the above improvements are amongst the most eye-catching, a range of providers have made improvements to their fixed rate offerings, suggesting that rates may be on their way back up.

Amongst the providers making improvements in the last week were Bank of Cyprus UK, who increased the rates on its fixed rate bond offerings, although only the 3 year bond (2.46%) made it into the top five bonds for its term. We also saw new best buy 2 (2.21%), 5 (3.03%) and 7 year (3.11%) fixed rate bonds from Secure Trust Bank and a best buy 2 year bond (2.20%) from Shawbrook Bank. Tesco Bank made improvements to its range of fixed rate bonds, although only the 4 year bond (2.55%) made it into the best buy tables. Virgin Money improved its fixed rate bonds and fixed rate ISAs and whilst the fixed rate bonds did not trouble the best buy tables, the improved 1 year (1.65%) and 2 year (2.00%) fixed rate ISAs both now feature at the top of the tables for the respective terms. Amongst fixed rate ISAs, Coventry Building Society improved its 5 year fixed rate ISA from 2.30% to 2.40%, improving its position in the best buy table and unusually, this change benefitted existing account holders as well as new accounts opened, which is almost unheard of amongst fixed rate accounts. Finally the last action of the week saw new best buy 3 (2.05%), 4 (2.15%) and 5 year (2.40%) fixed rate ISAs launched by Julian Hodge Bank.

With all of the recent improvements made amongst fixed rate bonds in recent weeks, savers will start to wonder when the rates will peak and when they should act. Whilst it is positive to see upward movement, this competition may not last forever and as quickly as it started it may end and savers should probably not hang on for too long in case they miss the boat.

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