Money saving expert Martin Lewis lifted the veil on savings accounts this week on his show.
ITV’s weekly Martin Lewis Money Show sees the financial reporter answering questions from “portfolio watchers” from top to bottom, and tonight he gave some great advice for those with savings accounts.
On Thursday evening, he pointed out that the highest interest rates for savings have more than doubled since March – so now is the perfect time to “make sure every penny pays.”
“The highest savings interest rates have improved a lot lately, I’m still not saying they’re great, but they’ve gone up a lot. In March, the first easy-to-access account was paying 0.4% now it pays 0.67% – the same interest and more than half as much.
“The best two-year solution was only 0.74%, now it’s earning 1.6%, so that’s more than double what she paid. Now the reason these rates have gone up is because the long term forecast for interest rates has gone up and that’s what they’re set on, and there is competition in this market when it isn’t. there was none before.
“But what is fascinating to me is that if we go back a year and a half, fixed rate savings and easy access savings pay about the same price, but that gap is growing. is hollowed out so that fixed rates are now overwhelmingly more competitive than Easy Access, so they’re a good bet.
“The problem with all of this though, is that none of these rates are even close to inflation, so the truth is savings accounts always lose accounts, but you at least want the best savings. possible as this mitigates the impact of the price hike so my big call to anyone looking is if you have any savings go check the interest rates you are paying then compare them to the rates I am going to give you. speak. “
Help to save
Martin first spoke about his choices for “unbeatable” savings accounts for interest rates, starting with the government’s Help to Save program.
“These are the unbeatable accounts for interest rates – if you can do it, you should – for those with low incomes, for example if you are on universal credit, there is the government’s Help to Save system. .
“Here you can put up to £ 50 a month over two years and it gives you a bonus – 50% on the highest amount you have, so after one year say you have £ 600 you have a problem and need the money, which many low-income people will find, so you don’t put anything in for the rest of the two years.
“Because the highest amount you had was £ 600, 50% of that amount is £ 300 – that’s the bonus you will get, totally unbeatable. If either of you qualifies for it, you have to go, it’s a big winner. ”
Lifetime ISA (LISA)
“The Lifetime ISA is very similar for first-time buyers,” Martin said.
“If you are between the ages of 18 and 39, as the first time buyer buying an eligible home, which is just about any residential home that costs less than £ 450,000, you can get a 25% bonus on your savings.
“You can invest up to £ 4000 per year, so the maximum bonus each year is £ 1000. The best ISA for life is with Moneybox at 0.6%. You need to do a little more reading, but absolutely , first-time buyers or those who think about it, this is a great place to save. ”
The best fixed rate savings accounts around
Fixed rate savings means that you lock up your money and cannot access it during this time, so you should be aware of this – these accounts usually pay higher interest rates because they can guarantee your retention. money for a longer period.
Martin said: “The highest fixed one year rates right now? Zopa – 1.35%, you can also get a fixed cash ISA, they pay less – Hampshire at 0.95% – you can withdraw from a cash ISA but you pay a big interest penalty if you do.
Major two year fixes – SmartSave 1.6% but a minimum deposit of £ 10,000, so Zopa is slightly less at 1.59% but only £ 1,000 minimum deposit. Top cash ISA again pays a lot less – Close Brothers at 1.2%.
“Now it may surprise you, but UK based Islamic banks – therefore fully UK regulated, have full savings security, which are Sharia compliant, pay more – the solution to one year of Al Rayan is 1.45% with a minimum deposit of £ 5,000, two years is 1.76%.
“But it’s not an interest – because you can’t have an interest under Islam – it’s an expected profit, although no UK-based Sharia account that I know of. never paid the full rate.
“So you might want to access them – you don’t have to be a Muslim to do that and they pay higher rates, and if everything goes according to plan you would get more that way.
“You might be thinking ‘you could fix it longer’ – you’re right, you can get a five-year solution that pays more than 2%, but with the prediction that interest rates could go up, if you’re stuck for five years at 2%, in a few years you might look back and think ‘why am I locked up?’ so that’s a tough decision, but go look online and find those best rates. ”
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