Nationwide Increases Savings Rates

Sep 15, 2011   //   by Daniel Morris   //   Banking and Savings Accounts, Latest Product Updates  //  Comments Off on Nationwide Increases Savings Rates

Nationwide have increased their rates on a wide range of its saving products from last week (September 7th).

The interest that is paid on their six-month and one-year Fixed Rate Bonds and e-Bonds has raised by 0.2 per cent. This will also apply to their 18 month Tracker Bond and Tracker e-Bond.

As well as this, Nationwide have also announced the launch of a new two-year deal to go along side their existing three-year option, which is set to stay the same.

For Fixed Rate ISAs, the rate has grown by the same percentage for the one-year deals, stays the same for the three-year option and there is a new two year account now available to customers.

In related news from Nationwide, there has been an interest increase on their MySave Online Plus account, and in addition to this a new 75 Day Saver product has now been launched by the bank.

Richard Marriott, head of savings at Nationwide, has recently said: “As one of the country’s leading savings providers we aim to ensure our savers get a competitive return on their money and these new rates will help do just that. In the current climate, it is important to cater for a variety of savings needs.”

However, those savers applying for a brand new range of tracker bonds could find that they end up being stuck with an unhealthy deal if, as predicted, interest rates continue to remain frozen at their current record lows for another year or so.

The tracker bonds in question are the latest ideas from bank and building society men who believe that the Bank of England base rate must rise from its all time low of 0.5 per cent.

These bonds tie up your money for one or two years, but unlike a fixed rate account, the interest rate that you receive can change during the term – meaning that if the base rate goes up, so will your rate of interest.

However, if current predictions are correct and the base rate remains stuck at 0.5 per cent, a tracker bond can become very poor in value to prospective savers.

Sam Tombs, of Capital Economics has recently offered his opinion, saying, “Top fixed-rate bonds look good value if interest rates are going nowhere.”

While most tracker bonds guarantee to pay around 2.5 per cent above the base rate for the first year, they cannot match a top two-year, fixed-rate alternative, which will pay closer to 4 per cent.

This means that, to match the best two-year account, the base rate would have to rise by a very steep 1.5 per cent by next September – which would confound economists’ predictions.

Earlier in the year, the base rate was widely predicted to rise as early as this month.

But with problems in the Eurozone and the weak economic recovery in Britain means that many economists are predicting the base rate will be stuck at its record low for another year – or possibly even longer as some experts have predicted it could stay frozen until the end of 2013.

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