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Find all the latest news, stories, insights and tips from Paragon Bank.



Savings market trends – May 2021

Derek Sprawling, savings director at Paragon Bank, comments on some of the biggest trends to impact the savings market in May.

“May has been a month filled with optimism for many of us. The next round of lockdown restrictions lifted, and we were finally able to enjoy a drink or meal indoors and welcome loved ones into our homes for the first time in many months.

“For many sectors and businesses worst impacted by the pandemic, this might feel like the beginning of what will be a long road to recovery. For consumers, the end of May spelled tentative steps towards a semblance of normality.

“Things are also looking up across the savings market, where green shoots are starting to appear with average interest rates inching up for the first time since October 20201. Data from Moneyfacts shows that the average rate on a one-year fixed rate product is now 0.44%, up from 0.42% last month.

“However, it’s very much worth noting that the clearing and high street banks are pulling this average down – those usually offer rates at the much lower end of the scale. The more nimble and competitive mid-tier and challenger banks often sit at the top of the best-buy tables, and Paragon has been no exception.

Just last week, we implemented rate increases across our entire range of fixed rate bonds and ISAs, increasing options for savers looking for competitive fixed rate products. Unlike many other online providers, we also offer postal applications across all our fixed rates accounts – a channel overlooked by many other providers in this space.

Easy access lags behind

Despite fixed rate accounts looking up, Moneyfacts data also shows that the average interest rate on easy access products is still a paltry 0.16%. This is less than half of the rates currently offered by providers on easy access in the best-buy tables.

My suggestion for savers looking for a competitive rate with access would be to review their savings goals and consider different types of accounts outside of traditional easy access or fixed rate products. 

For those saving in an emergency fund, a limited or defined access product could be a great option, and offers a bit of extra interest. For people saving for a specific goal who are sure they won’t need the money until a known date, notice accounts should also be considered.

In this low rate environment, we are also seeing more and more providers offer prize accounts to customers, which give people the chance to win a cash prize of as little as a pound or as much as £1million.  

However, a recent investigation by The Telegraph revealed that 74% of premium bond winners have never won any money at all, and that most winners have large sums invested. It’s important for savers to remember that the odds are very much against them with most prize accounts, and that chances of winning a prize are often less than one in a thousand.

There is a risk that the allure of prize accounts might just guarantee savers miss out on hundreds or even thousands of pounds of potential interest if they just selected a best-buy interest-paying product. It’s also worth noting that saving large sums in a prize account increases your chance of winning considerably, which is why half of premium bond balances are held by less than 5% of customers. If you have a few thousand to invest, it’s usually a better idea to look at other options as you’re likely to earn nothing.

Whichever option savers choose, there is one rule of thumb to stick to: move any savings out of current accounts if you aren’t earning any interest. As we come out of lockdown and begin to spend a little bit more, having lockdown savings in a separate account will also be very helpful if you’re trying to budget effectively.  

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551