A new challenger bank has launched a better buying savings rate of 2% as fixed bond transactions continue to rise.
Recognize Bank was given the green light to take deposits earlier in the week and is part of the City of London group.
The account is a five-year fix and marks the first time a 2% deal has been offered since the early weeks of the pandemic in 2020, when Gatehouse Bank offered the same rate as ‘expected profit’.
Best Buy: Recognize Bank launched a 5-year fix at 2% and a 95-day notice account paying 1%
Accounts can be opened with Â£ 1,000 but only online, cash is protected by the Financial Services Compensation Scheme up to Â£ 85,000 and deposits will be used to lend to small and medium-sized businesses.
The rate is far higher than other agreements that require savers to fix their money until 2026.
Atom Bank is next in our independent best buy rankings with 1.84%, followed by Secure Trust with 1.8%.
It is unusual for a new challenger to enter the niche long-term fixed rate market, and the spread between one and five year fixed rates has narrowed somewhat in recent months.
For example, savers can enter 1.45% fixed over one year or 1.76% over two years with Al-Rayan bank.
Rachel Springall, financial expert at news site Moneyfacts, adds: “It wouldn’t be too surprising if there are some savers who are reluctant to lock in their money for the long term, but there are plenty of fixed bond options. in the shorter term to consider and even note the accounts.
On the latter, Recognize also launched a 95-day notice account paying 1%, which is one of the best rates currently offered for this type of account.
By comparison, only Oaknorth offers a slightly better 95-day price at 1.01 percent, while the open-access best buy currently is 0.6 percent.
These types of notice accounts give savers a better rate than easy access, but more flexibility than locking in money that they can’t access for a long time.
Rachel adds: âSavers who feel uncomfortable with locking their money for a year or more may find notice accounts as an alternative between fixed and easy-to-access accounts, especially since notice is up.
âOn a monthly basis, the average notice rate increased for the fifth consecutive month to 0.47% and is at its highest level for the whole year. There are many challenger banks in this area, as is the case in the fixed rate bond market. ‘
No rate currently offered by a traditional savings provider with FSCS protection can currently come close to inflation, which was recorded at 3.2% for August.
Jason Oakley, Managing Director of Recognize Bank, said: âBy saving with Recognize Bank, clients will not only have a secure home for their money, they will also know that their FSCS protected savings are helping ambitious SMEs, so they are directly supporting the UK economy as well.
The bank says business savings products will be launched in the future and is targeting 50,000 customers.
Backed by cloud computing technology, the bank says its aim is to make lending decisions faster and accelerate access to funds, through a network of regional hubs in London, Manchester, Birmingham and Leeds.
Recognize currently offers a range of unregulated lending options, including commercial mortgages and bridging loans, with professional rental mortgages soon to follow.
Since opening in November 2020, the bank says it has already received Â£ 750m in loan applications and aims to provide more than Â£ 1.3bn in business loans over the next five years.
Fixed rates increase but shelf life is shortening
The average one-year fixed rate bond has fallen from 0.6% in August to 0.67% today, according to Moneyfacts.
Meanwhile, the average of long-term fixed rate bonds fell from 0.87 percent to 0.94 percent.
This figure is also higher than in September 2020, but far from the 1.34% for one year and 1.64% for the longer term recorded in September 2019.
Additionally, the average hold period of a fixed rate bond has fallen to 33 days on average, down from 53 days a month ago, suggesting that trades are not as long.
Rachel adds, âSavers will need to act quickly to respond to the noticeable flow of rate hikes in the market and indeed any demands from savers looking to fix their cash flow for a competitive return. ‘
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