Al Rayan Bank ups its fixed rate deals to as high as 4.9%
Fixed savings rates race to 5%: Al-Rayan Bank launches three-year deal and pays 4.9%, experts say other banks will follow suit
- Al-Rayan Bank has launched a three-year fixed rate account and pays 4.9%
- It moved to the top of This is Money best buy charts with a one-year fix of 4.75%
- Experts think we’re likely to see a 5% deal hit the market in the coming weeks
The savings rate is rapidly approaching the 5 percent mark, while the competition at the top of This is Money’s best buy savings charts is at a boiling point.
Al Rayan Bank became the latest provider to lead the way after launching four new best buys.
Most notably, it has launched a three-year fix and pays 4.9 percent – the highest fixed rate deal on the market today.
Savers who put £10,000 into Al Rayan’s three-year deal can expect to receive £1,545 in interest over the three-year period.
Saving sweet spot: Savers can now get almost 5% on their money
Andrew Hagger, a personal finance expert at MoneyComms, believes we may see a 5 percent rate hit the market in the coming weeks.
He said: “The market for fixed rate savings products is becoming increasingly competitive, we could even see a 5 percent fixed rate in the coming weeks if this level of activity continues.”
While the best fixed rate deals race to 5 percent, driven by market expectations of more base rate hikes, it is still well below the consumer price index’s last level of 10.1 percent for March.
Al-Rayan has also launched the market-leading one-year deal and pays 4.75 percent, overtaking Shawbrook Bank and Close Brothers yesterday, which launched 4.7 percent deals.
Savers who put £10,000 into Al Rayan’s one-year deal can expect to receive £475 in interest by the end of the term.
All Al-Rayan accounts require a minimum deposit of £5,000 and no withdrawals can be made until maturity.
All deposits made are protected under the Financial Services Compensation Scheme up to £85,000 per person.
The account can be opened online or via the digital banking app or by telephone.
As an Islamic bank, instead of paying interest to depositors, Al-Rayan Bank invests customers’ deposits in ethical, sharia-compliant activities to generate profits.
Earnings rates are expected; however, since the Bank’s inception in 2004, it has always paid its clients at least the rate of profit it has quoted.
Profits are calculated monthly and can be deposited into a designated account every three months.
Customers also have the option of keeping the winnings from the deposit in an account that will be paid out together on the maturity date.
However, savers should consider the possible tax implications when doing this for longer-term fixed rates.
What does sharia-compliant mean?
As a sharia-compliant bank, Al Rayan follows the laws and regulations of Islam and is guided by the Islamic economy.
The core principles of Islam are not to charge interest on borrowing money and not to pay interest on savings accounts.
Therefore, instead of listing interest rates, Sharia savings accounts indicate how much profit savers earn through an “expected profit” rate – although the outcome is the same for savers.
Money invested in a sharia bank cannot be used to fund harm-inducing businesses such as alcohol, tobacco or gambling.