Markets suggest there is a 95% chance the Bank of England will up its base rate to 0.5% next week and savings rates are already starting to rise in anticipation.
So, with Nationwide being one of the first to move, how do its new rates compare with the rates offered by other savings accounts? Let’s take a look.
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Is the base rate due to rise again?
According to data from CME Group, markets are 95% sure the Bank of England’s Monetary Policy Committee will up its base rate from 0.25% to 0.5% when it next meets on 3 February. If that happens, it will be the second time the committee has acted in the space of two months.
That’s because the BoE previously raised its base rate from its pandemic low of 0.1% to 0.25% in mid-December.
The base rate is a big deal, as it sets the rate at which banks can lend to one another. A low base rate, as the UK has been used to for several years, means banks can access money cheaply. As a result, a low rate means there’s little need for providers to offer high savings rates to attract retail deposits. This is why we’ve seen such low savings rates in recent years, especially over the past 18 months or so.
Yet with the base rate predicted to rise again, it’s possible savers will soon see better savings rates. In fact, Nationwide has already made moves in anticipation of a rise.
How has Nationwide changed its savings rates?
Nationwide has announced it will be increasing the savings rates on several of its savings accounts. Increased rates of up to 0.5% will apply to its Flex Regular saver, Help to Buy ISA and Children’s savings accounts. The changes will take effect from 1 February.
Commenting on the rate increases, Tom Riley, director of banking and savings at Nationwide, said that the building society is keen to show they are committed to savers. He explained: “As one of the first major savings providers to announce its changes, we’re demonstrating our commitment to savers, particularly children and regular savers, such as those saving for their first home.”
“We continue to focus on providing a range of competitive savings products to our members. In recent months our average deposit rate has been two-thirds higher than the market average, but we also need to balance our savings rates with the need to ensure we provide good value for our borrowers and continue to invest in services that are important for our members.”
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How do Nationwide’s new rates compare?
Let’s take a look at how Nationwide’s Flex Regular saver, Help to Buy ISA and children’s savings accounts will compare once the new rates come into effect.
Nationwide Flex Regular Saver
When the changes come into effect, Nationwide’s Flex Regular Saver interest rate will increase from 2% to 2.5% AER variable.
The account is available to customers who already have a Nationwide current account. With this in mind, it’s similar to the NatWest and RBS regular savings accounts which both pay 3.04% AER variable. This rate is more than 0.5% higher than Nationwide’s new rate.
However, it’s worth knowing that the NatWest and RBS accounts only allow you to save up to £50 per month. Nationwide, on the other hand, allows you to deposit up to £200 per month.
Nationwide’s Help to Buy ISA
The savings rate on Nationwide’s Help to Buy ISA will increase by 0.25% to 1.25% AER variable. This means the account will offer the second-highest Help to Buy ISA savings rate after the Newcastle Building Society, which pays 1.64% AER variable.
The Help to Buy ISA has now closed to new applicants. However, if you already have an account, you’re free to transfer it to another provider. For more on this, see our article on whether the Help to Buy ISA is still available.
Nationwide’s children’s savings accounts
As well as upping the savings rates on its regular savings and Help to Buy ISA accounts, Nationwide is also increasing rates on all of its children’s savings accounts by 0.25%.
This means that Nationwide’s Future Saver and Junior ISA will pay 1.25% AER variable from 1 February. However, the accounts still won’t be market-leading even after the rate increases.
That’s because, right now, the highest interest rate on a children savings account is 3% via the Santander 123 mini account. You’ll get this rate as long as your child has between £1,500 and £2,000 to save. Meanwhile, the highest rate offered on a Junior ISA is 2.25% AER variable via Tesco Bank.
Are you are looking for the highest savings rates? See our list of top-rated savings accounts.
