Hodge Bank raises interest to 5.14% on savings account and earns ‘excellent’ rating | Personal Finance | Finance
Hodge Bank has increased the interest rate on its fixed savings account to 5.14 percent, earning an “excellent” Moneyfactscompare rating.
Savers need a minimum deposit of £1,000 to launch the account and interest, which is fixed for one year, can be paid monthly or on maturity.
Commenting on the deal, Caitlyn Eastell, a spokesperson at Moneyfactscompare.co.uk, said: “This week, Hodge Bank has increased the rate on its One Year Fixed Rate Bond improving its overall position in the market.
“The account now pays a competitive 5.14 percent gross/AER on its maturity. Alternatively, savers can select a monthly interest payment option which pays 5.02 percent gross/5.14 percent AER.
“It is important that savers are comfortable with locking their investments in for the full term as early access is not permitted, but they may be glad to see that they can take advantage of making further additions 14 days from the account opening. Overall, the deal earns an Excellent Moneyfacts product rating.”
While Hodge Bank may be offering a more competitive rate, it isn’t quite topping the table in its sector.
Al Rayan Bank tops the list for one-year fixed savings accounts with an Expected Profit Rate of 5.2 percent. Instead of paying interest to savers, Al Rayan Bank, as an Islamic bank, invests customers’ deposits in ethical, Sharia-compliant activities to generate a profit.
Profit rates are expected, however, the bank said it has always paid at least the profit rate it has quoted to its customers since it was founded in 2004. Savers need a minimum deposit of £1,000 to launch the account and profit is paid on maturity.
SmartSave places just behind with an Annual Equivalent Rate (AER) of 5.18 percent. Savers need a minimum deposit of £10,000 to launch the account and interest is paid on maturity.
Savers are being urged to “take action” after new research from AJ Bell has found a staggering £253billion is currently sitting idle in bank accounts earning no interest.
Laith Khalaf, head of investment analysis at AJ Bell, commented: “A mountain of cash paying no interest to savers built up in the wake of the financial crisis as a result of low interest rates and bank funding schemes introduced by the Bank of England. Between March 2009, when interest rates were cut to the emergency level of 0.5 percent, and October 2022, this inert cash pile rose from £58billion to £272billion, according to Bank of England data.
“Given the dramatic rise in interest rates over the last few years, one might have expected this cash mountain to crumble, but remarkably £253billion still sits in accounts paying zero interest to households.
“This is money which is simply wasting away once the effect of inflation is taken into account. It would hold as much value stuffed into a mattress, if you could find one that would hold a quarter of a trillion quid.
“The last time interest rates were at 5.25 percent, in April 2008, there was £33billion held by households in accounts paying no interest. Even accounting for the increased stock of household savings over that period, that still looks like a phenomenal explosion in this type of account.”
To give some context, Mr Khalaf said: “Between 2008 and 2024 the amount held in instant access accounts paying some interest has increased from £510billion to £911billion, so nowhere near the same level of growth.
“Indeed, even that cash held in instant access accounts isn’t paying savers a whole hill of beans in interest. The average rate on cash held in instant access accounts is currently 2.1 percent.
“This is below the rate of inflation, and compares very unfavourably to top savings accounts on the market, which are paying in excess of five percent. Savers can wait for banks and building societies to improve their average rates, or take action themselves.”