Major building society launches ‘market-leading’ savings rate of 6.5% for 3million customers – but how does it compare?
A MAJOR building society is offering savers the chance to access a market-leading savings rate of 6.5%, making it one of the best deals on the market.
Vernon Building Society’s new online regular saver account has been launched to help Brits start saving – and it’s available for around three million savers.
James Hyde, spokesperson at Moneyfactscompare.co.uk, said: “The new online regular saver from Vernon Building Society offers 6.5% interest, making it one of the highest-paying regular savings accounts in the market at present.”
The Stockport-based mutual is offering the account to customers based in Greater Manchester and Cheshire.
The postcode regions that can access it include: BL, CH, CW, M, OL, SK, WA or WN.
Interest on the new account will be calculated daily and added to the account at the end of each month.
If savers started from nothing and then deposited £250 a month into the account for 13 months, they would have £3,373.55 at the end.
This is £123.55 more than they would have paid in.
The fixed-term account does not allow for customers to make withdrawals for 12 months, however there is no penalty if you choose to close your account.
At the end of a 12-month period, all but £1 saved will be transferred to a Vernon easy-access account. An account will be opened for you if you don’t have one already.
One catch is that savers are required to deposit between £25 and £250 a month – although there are no penalties for missing a monthly deposit.
The launch of the account comes as other top lenders have been cutting the rates on their savings accounts.
Santander recently cut the rate on its popular 5.2% easy access savings account to 4.2% – a significant decrease.
Vernon BS’s 6.5% interest rate is subject to change, for example if the Bank of England’s base rate rises or falls in the future, but account holders will be informed in advance.
The building society said it decided to launch the account after the Building Societies Association reported that one in seven UK adults have no savings at all.
Steven Fletcher, CEO at Vernon Building Society, explained: “We want as many people as possible in our heartland to benefit from this high interest savings account.
“Putting away a little every month soon adds up and can help people save towards their first house or cope with an emergency.
“We recognise in a cost-of-living crisis many may feel they don’t have enough money to save which is why we’ve set the minimum monthly saving at £25.
“Our aim is to encourage positive savings habits so people in Greater Manchester have better financial health.”
How does the account compare?
The 6.5% interest rate offered by Vernon Building Society is competitive and it’s one of the top deals around right now.
However, it’s always worth shopping around to make sure you’ve got the best deal.
Fixed-term accounts accounts reward customers with higher interest rates in exchange for locking their money away for a period of time, but one downside is that withdrawals can be restricted.
Make sure you can afford to lock any cash away for the set term before putting into a fixed saver.
There are a couple of other accounts paying even higher interest, although some have requirements attached.
First Direct’s offers a 7% savings rate on its regular saver, with interest paid on maturity after 12 months.
Its allows monthly deposits between £25 and £300, with no withdrawals permitted.
However, you must open a current account to access it and you can only save up to £3,600 a year.
The Co-Operative bank’s regular saver issue is also offering a 7% savings rate with interest paid on maturity after 12 months.
It has no minimum monthly deposit, and allows you to pay in up to £250 a month. This account also offers unlimited withdrawals.
Nationwide’s flex regular saver is offering a rate of 6.5% with interest paid on the anniversary of opening.
Monthly deposits of up to £200 are permitted as well as unlimited withdrawals, although if four or more withdrawals are made in 12 months the saving rate falls to 2.15% for the remainder of the term.
What other options are available for savers?
There are several types of savings accounts available to customers, so you need to make sure you select one that suits your circumstances.
Easy-access accounts and regular savings accounts, which allow greater flexibility when it comes to withdrawing your cash, but they tend to offer slightly lower interest rates.
If you’re happy to leave your cash in your account for longer then you can consider a fixed-bond or notice savings account.
Before opening a new savings account it’s always worth having a browse on price comparison websites.
Moneyfactscompare, Compare the Market, Go Compare and MoneySupermarket will help save you time and show you the best rates available.
These sites let you tailor your searches to an account type that suits you.
It’s worth checking the latest savings rates frequently as more movement in the market is predicted.
It has been predicted that the Bank of England interest rate will fall later in the year from the current rate of 5.25%.
If it elects to decrease the base rate, the interest offered on your savings account could also rise or fall.
Here’s a list of the types of savings accounts on offer.
Easy-access savings accounts – up to 5.2% (as of June 18 2024)
Easy-access savings accounts allow you to deposit and access funds as and when you need without giving advance notice.
You can open an easy-access account with as little as £1, with no minimum deposit requirements.
This does mean rates tend to be lower, but if you want to have easy access to your cash this could be the option for you.
Savers can currently access interest rates of 5.2% from Ulster Bank or 5.1% from Chase.
Notice savings accounts – up to 5.3%
Notice accounts offer slightly higher rates than easy-access accounts.
But you’ll need to give advance notice to your bank (up to 180 days in some cases) before you can make a withdrawal, or you’ll forfeit the interest.
Savers can currently get 5.3% with LHV Bank on a 95-day notice account.
Those depositing £1,000 into this account can currently expect to gain £53 in interest after 12 months.
Regular savings accounts – up to 7%
These accounts generate decent returns if you pay in a set amount each month.
To get the best rates, you may also need to hold a current account with the provider, as these linked regular savings accounts pay the top rates.
First Direct offers a regular saver account paying 7% in interest for current account holders.
You’ll need to save between £25 and £300 a month, and up to £3,600 a year.
If you were to save £300 every month for 12 months with this account, you’ll earn approximately £136.50 in interest.
Fixed-bond savings accounts – up to 5.22%
These offer some of the highest interest rates – but this comes at the cost of being unable to withdraw your cash within the agreed term.
If interest rates increase during your term, you can’t move your money and switch to a better account.
Some providers do allow withdrawals, but you may be charged an exit fee and will likely have to forfeit any interest gained.
Mizrahi Tefahot Bank Ltd offers a rate of 5.22% on a three-month fixed-term with a minimum deposit of £1,000 and a maximum deposit of £85,000.
How to pick the right savings account
Anna Bowes, founder of Savings Champion, explains how to pick the right savings account for you.
“It’s important to choose the right savings accounts for your needs, so that might be a regular savings account if you are starting out and building up your savings – and/or the top paying easy access accounts for money you may need to dip into,” says Anna Bowes, founder of Savings Champion.
“Once you have built up a lump sum you could also earn a little more if you are prepared to tie up your cash. A fixed term bond rate will not fall, even if the base rate is cut.
“Although the longer-term bond rates are lower than the shorter term and top easy access rates at the moment, this is a clear indication that rates are likely to fall over the next few months – so locking in at least some of your cash now for longer could be a really wise decision.
“It’s easy to find the best accounts by looking on trusted comparison websites such as SavingsChampion.co.uk. By picking the best rates you can make your money work harder, to give you more pounds in your pocket.”
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