Why it’s time to tie up your savings longer: SYLVIA MORRIS

A new trend is taking hold among savers, banking industry insiders tell me – and it’s one I approve of.

Savers are finally holding on to their money longer to grab top rates before they disappear.

Since fixed rate bonds and Isas came back into the spotlight a few years ago, the one-year version has been the favourite.

As interest rates continued to rise, savers were – understandably – unwilling to commit for a longer period of time.

The rising cost of living also made savers reluctant to build up savings in case they had to pay bills.

Now savers are piling into two-year fixed rate deals to ensure their money continues to beat inflation for longer.

But now that it appears that the inflation dragon has been defeated and growth rates have fallen to the magic limit of 2 percent according to recent figures, there is a risk that the savings rate will also fall sharply.

At the beginning of this year, money markets predicted a series of cuts in the base interest rate from March onwards.

But inflation fell more slowly than expected, and the base interest rate is still stuck at 5.25 percent after ten months.

However, all signs point to an impending fall in interest rates and markets expect the Bank of England to cut rates in August.

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Until now, competition between banks and building societies has meant that interest rates on bonds and Isas have remained quite high.

As I predicted last week, cash Isa rates are still rising – with Shawbrook’s best one-year rate now at 4.93 per cent.

The best one-year bonds pay more than 5 percent, with 5.21 percent directly from Vanquis Savings or Ziraat Bank through the Raisin savings platform leading the way.

But two-year bond yields are nipping at their heels. Close Brothers Savings and Vanquis pay 5.06 percent and Access Bank pays 5.05 percent.

The two-year version may be a better choice than a one-year loan if you plan to renew it in a year.

This time next year, you would need to get 4.8 percent on a one-year bond to beat the 5 percent that has been available for two years now, which seems unlikely.

For those who want a longer-term bond and don’t need access to the money during that time, choose one that pays interest annually rather than lumping it together at the end of the term. Then you can use your personal savings deduction for the annual interest.

Otherwise, go for a fixed rate Isa. The top two-year interest rates are just over 4.6 percent, with United Trust Bank and Close Brothers at 4.67 percent and Secure Trust and Cynergy Bank at 4.66 percent.

The sale of Sainsbury is an opportunity to jump ship

A warning to all Sainsbury’s Bank customers: it’s time to think about switching to a new bank.

The company is to sell its savings business with £2.6 billion in customer deposits to NatWest. The deal is expected to close in the first half of next year.

If I had an easily accessible savings account or cash Isa at the supermarket bank, I wouldn’t be stuck hoping that interest rates will improve once NatWest takes ownership.

Sainsbury’s Bank offers such poor rates that every month you stay put could cost you money.

For example, Cash Isa fell from 4.4 per cent to 3.5 per cent for new customers last month, while other providers were increasing rates.

The rates on older variable rate accounts are terrible and vary wildly depending on when you opened yours; most are terrible and only 1.45 percent.