More banks have recently thrown their hat into the ring of offering competitive savings rates, vying for the top spot on the savings tables. Currently some of the best rates are with two-year fixed-rate bonds, though if you are not on the market for a fix-period bond there are still options many other options are your disposal.
More Choices for Savers
Nottingham Building Society (NBS) and the Islamic Bank of Britain (IBB) have the second-best rates around, both with 4% two-year rates. Internet bank Cahoot, owned by Santander, is just fractions better with a 4.01% interest rate over the same period.
While Nottingham is not an internet bank like Cahoot, its top around is the eSaver Fixed, which is an online account that required a 500 pound deposit to open and pays 3.2% after basic tax rate is deducted.
The Islamic Bank of Britain observes Sharia law with its banking and investment policies, and while it has historically been the frontrunner in serving the Muslim community, its doors are open to everyone. The minimum opening deposit is set at 1,000 pounds and it pays the same 3.2% after tax is deducted.
The difference in practices is that lending in return for interest is prohibited by Shariah law. Therefore, the money that you receive in interest must come from legitimate trade and investment. The 4% interest that you receive, then, is a promise of returns on the money that they have invested.
It is more an ‘expected profit rate’ than interest, so if they are unable to generate enough profits the customers will be notified and allowed to take their money elsewhere without charge or repercussions.
The Right Plan for You
David Hyde of This is Money advises that tying up cash for two years in exchange for a 4% rate is a good option to consider, especially taking into account that the Bank of England base rate is predicted to stay at 0.5% until at least 2013.
Choosing between the best fixed rates in Britain is entirely up to personal choice, as all of the banks are covered under the Financial Services Compensation Scheme, which protects your money if a bank should collapse.