Shawbrook Bank launches new best buy one-year fix paying 5.06%

Shawbrook Bank launched the best one-year fixed rate bond deal today, with a payout of 5.06 percent.

It overtakes SmartSave Bank’s 5.01 percent deal, which previously topped This is Money’s independent best-buy savings chart.

Someone who puts £10,000 into Shawbrook’s account can expect to see £506 in interest after a year.

Savers opting for Shawbook’s deal will need a minimum of £1,000 to get started.

They can deposit up to £2 million, although the Financial Services Compensation Scheme only protects savers up to £85,000 per person or £170,000 in the case of joint accounts.

That means deposits over £85,000 are not automatically protected if Shawbrook fails.

Savers should also be aware that as this is a fixed rate deal, they won’t be able to withdraw their money until the end of the 12 month term.

Shawbrook also launched a market-leading one-year cash Isa, which paid 4.43 percent, overtaking NatWest, Paragon and West Bromwich BS at the top of This is Money’s best buy cash Isa table.

Shawbrook also increased its easy-access rate to 3.75 percent for its easy-access account.

– Check out the best rates here for easy access.

The bank has also launched an easily accessible cash Isa deal that pays 3.55 percent.

This is again 0.07 percentage point lower than the best buy offered by the Cynergy bank which pays 3.62 percent.

Adam Thrower, head of savings at Shawbrook, urged Britons to be more willing to siphon their savings to make the most of the better rates now being offered.

He said: ‘Incredibly, almost half of savers have not switched accounts since interest rates started to rise last year.

“The savings market is now more vibrant than it has been in over a decade, so this should be a real incentive for people to get the most out of their money and switch to a better paying savings provider.”

How high will the rates go?

That is the big question for savers right now. Much will depend on how high inflation turns out to be in the coming months, and how willing the Bank of England is to raise key interest rates to keep it up.

Although inflation fell to 8.7 percent in the 12 months to April, it did not fall as much as financial markets had predicted.

This led to a widespread belief that we are heading for further rate hikes.

Market interest rate expectations are reflected in swap rates – the rates at which financial firms lend money to each other.

The swap market is pricing in three, or possibly four, additional rate hikes to peak at around 5.5 percent – up from 4.8 percent at the end of last week.

Independent economic research firm Capital Economics now forecasts that the Bank of England will continue to raise key rates to a peak of 5.25%.

Neil Shearing, group chief economist at Capital Economics, said: “The most disturbing aspect of the April inflation data, released on Wednesday, was evidence that price pressures are increasingly domestically sourced.

“That is why we now expect the Bank of England to raise interest rates further than we previously thought, from 4.50 percent now to a peak of 5.25 percent.”

This expectation of longer interest rates means that we could see savings rates rise even further from here.

Emma Wall, interim head of Active Savings at Hargreaves Lansdown, said: “Continued inflation makes it highly likely we will see another rate hike at the next meeting of the Monetary Policy Committee, but I would be cautious about the outlook from then on. ‘

James Blower, founder of savings website Savings Guru, says it’s almost impossible to name the peak for savings rates right now.

He said: “I thought we had seen the spike but the economic news is not improving much and if this doesn’t change it is possible we could go higher.

“If you think the economic outlook will deteriorate, there is a chance that prices will rise. If they think we are now past the worst, then rates are likely to fall again in the coming months.

“Personally, it’s incredibly hard to predict which way things will go and I’d suggest that if savers are happy with a risk-free rate of 5.06 percent, which is excellent by historical standards, I’d take the available rates now.”