Good news for Scotland's long-suffering savers

The rates on one-year bonds are particularly competitive. The average one-year bond rate is 1.29%, the highest recorded rate since April 2016 when it stood at 1.31%. Sarah Coles, personal finance analyst at Hargreaves Lansdown, the financial adviser, says: “The best rates in the one-year market are now over 2%, largely thanks to Gatehouse Bank marking its rebrand from Milestone Savings last month with a headline-grabbing 2%. Previously, the best one-year bond rate was Paragon’s 1.86%. Since Gatehouse Bank’s launch, Atom Bank has pushed its rate to 2.05%, currently the market leader.”

Savers might not be familiar with the names of the newer, so-called challenger banks, but both banks are regulated by the Financial Conduct Authority and are members of the Financial Services Compensation Scheme (FSCS), which protects up to £85,000 of your savings if the bank goes out of business.

Anna Bowes, director of Savings Champion, the independent savings advice site, says: “On the whole, things have improved over the last couple of years for savers who are shopping around for the best rates and it’s great to see one-year fixed-rate bonds pushed back above the 2% mark. But being active is key. Your high-street bank will not reward you – in fact these providers offer some of the worst rates on the market. It’s time for savers to take a well-informed leap of faith and try a provider they may not have heard of before - as long as they are part of the FSCS or European equivalent - in order to earn as much interest as possible.”

The best deals are also often only available to savers who are prepared to manage their accounts online or via a smartphone. Ms Springall says: “The accounts from Gatehouse and Atom banks are only available online, as are most of the other top-ten deals. You can also miss out on vital rate alerts if you don’t save online.”

Savers can earn higher rates in longer-term bonds. Paragon, Vanquis Bank and Secure Trust all pay 2.66% in their five-year fixed-rate bonds. Or, Gatehouse Bank currently offers 2.68% as an expected profit rate over five years.

The best-buy rates don’t always stick around for long, so the potential dilemma for savers is whether to opt for a fix now, or to hold out in the hope that rates will rise even higher. Ms Springall says: “Savers must be sure they are happy to commit to a long-term fix as interest rates are expected to rise in the future.”

It’s also wise to check the terms and conditions of your bond. Ms Springall says: “Savers will want to act fast to take advantage of the top rates, but they should be mindful of locking into a fixed bond prematurely. If this does happen, savers should carefully check the terms attached to any cooling-off period before they try to extract their funds, as in most cases there will be a penalty to pay for those who change their mind.”

Ms Coles recommends acting sooner rather than later. “If you want to cash in on the best rates right now, you’ll need to be quick, because table-topping rates in this market don’t tend to hang around for long. You can always find a reason to put off fixing your rate, but it’s pointless trying to second-guess the market while your savings languish in an easy access account paying 0.5% or less. Instead it makes sense to fix for the length of time that suits your needs, at the best rate available at the time.”

Customers who don’t want to tie up their cash in a fixed-rate bond can instead choose an easy access account. Rates have also been rising on easy access deals, though they are still lower than fixed rates. Tesco Bank, for example, increased the rate on its easy access account from 1.25% to 1.30% earlier this month. If you want an account offering unlimited withdrawals, the best-buy best rate of 1.30% is also available from a number of other banks, including RCI Bank and Shawbrook Bank.

Sainsbury’s Bank and Coventry Building Society also offer accounts paying 1.30%, but savers are allowed only a limited number of withdrawals each year.