The rates on most savings accounts are ridiculously low at the moment, so we were delighted to see a new entrant in the savings market this month.
The new player is called Agribank and it’s certainly paying above average rates on its accounts. If you’re prepared to lock your money away for three years, you could get a fixed rate of 3.35% a year on your cash. If you go for the five-year bond, you could get 3.6%. These are pretty juicy rates in today’s market.
The only drawback is that Agribank isn’t protected by the Financial Services Compensation Scheme (FSCS) in the UK. Agribank is actually regulated in Malta, and it’s not protected by the Maltese equivalent of the FSCS either. So if Agribank went bust, you run the risk of not getting any compensation.
That said, Agribank is pursuing a low risk business model. All the money it raises from savers will be lent to UK farmers. Agribank’s backers have a long history of successfully lending to farmers, so the chances of Agribank going bust are very low in our view.
Basically, you have a choice. Take a bit of extra risk and get a market-leading interest rate. Or play it 100% safe and go for an account that is backed by the FSCS.
The minimum deposit for Agribank is £10,000.
Best alternative: If Agribank doesn’t appeal, you might like the Vanquis Bank 3 Year High Yield Bond. It pays 2.81% interest, and the minimum deposit is only £1000.
2. Halifax BT 25 Month MasterCard
The 0% balance transfer market has been getting ever more competitive in recent months, largely because Barclaycard has been working hard to boost its market share.
Competition was cranked up even further when Halifax recently launched a new 25-month balance transfer card. This was an unprecedented move – we’ve never seen a card with such a long 0% period before.
So if you have a debt on a credit card, you could transfer that debt to the Halifax card and not pay any interest on the debt for 25 months! The only cost would be a 3% balance transfer fee. That’s pretty reasonable given the length of the 0% period.
Best alternative: After Halifax launched its card, Barclaycard quickly increased the length of the interest-free period on its leading 0% card. That card is now called the Barclaycard 25 Mth Platinum Visa.
3. Nationwide FlexDirect account
Nationwide has dramatically improved its free FlexDirect current account by boosting the interest rate to 5%. That’s a fantastic rate, beating the vast majority of savings accounts on the market today.
However, Nationwide is only paying interest on balances up to £2500, and the 5% rate is only available for the first year you have the account. After 12 months, the interest rate falls to 1%. You need to pay in at least £1000 a month to qualify for the interest.
On top of the interest payments, there are no overdraft charges for the first 12 months, after which point a hefty fee of 50p a day will be applied on arranged overdrafts of more than £10.
Best alternative: The Santander 123 account pays 3% interest on balances between £3000 and £20,000 and you can also get cashback on some of your spending. The cashback rate for petrol and train fares is 3%! That’s very impressive for a current account. On the downside though, you do have to pay a monthly £2 fee for this account.
Thanks to the government’s Funding for Lending scheme, the rates on the top mortgages have fallen to astonishingly low levels in recent months.
And now Chelsea Building Society has gone even further by launching a 2-year fixed rate mortgage at just 1.74%. That’s the lowest rate ever for a mortgage of this type. Admittedly, the fee is on the high side at £1825, and you need to have a deposit worth at least 40% of the property’s value. Still, it’s a very attractive deal for some.
Best alternative: If you don’t have such a large deposit, Nottingham Building Society has a great deal. Once again, it’s a fixed 2-year fixed mortgage and the interest rate is 2.79%. Crucially you can borrow up to 80% of the value of the property. The fee is £999.