Bank offers new 4.95% interest rate on savings account and earns 'excellent' rating

Cynergy Bank has changed the interest rate on its one-year fixed savings account to 4.95 percent

While this reflects a 0.05 percent reduction from the original deal, it has earned an “excellent” Moneyfactscompare rating for maintaining a competitive position in the market.

Commenting on the new offer, Caitlyn Eastell, a spokesperson at Moneyfactscompare.co.uk, said: “This week Cynergy Bank has reduced the rate on its Online Easy Access Account.”

However, she noted: “Receiving a small reduction of 0.05 percent, the account maintains a competitive position in its sector.

“Savers will only need to invest as little as £1 to receive the 4.95 percent rate and may well entice those who value flexibility when accessing their cash.

“Overall, the deal earns an Excellent Moneyfacts product rating.”

Interest is paid on the anniversary of opening, and up to £1million can be invested overall. Savers must be aged 18 or over and the account can only be opened online.

Fixed rate accounts can offer a layer of certainty to saving as these enable people to lock in the interest rate for the duration of the term.

But while Cynergy Bank may be offering a competitive deal, it isn’t quite topping the table. Allica Bank’s 12 Month Fixed Term Savings Account (Issue 60) offers an AER of 5.17 percent.

The account can be opened with a minimum deposit of £10,000 and interest is paid on the anniversary. Up to £250,000 can be invested overall and withdrawals are not allowed until the term ends.

Atom Bank offers an AER of 5.15 percent on its One Year Fixed Saver for those with smaller deposits to invest.

A minimum deposit of £50 is required and up to £100,000 can be invested. Interest is paid on the anniversary of opening and withdrawals are not permitted.

Commenting on the market, Lucinda O’Brien Money.co.uk’s savings expert, pointed out that “many accounts” are still offering inflation-beating interest rates.

She said: “Last week, it was revealed that inflation had fallen further to 3.2 percent. This is positive news for savers as it means there are still many accounts offering interest rates above inflation.

“If the interest rate is higher than inflation, this gives your money more purchasing power. Plus, there are still rates that match the base rate.”

The Bank of England Base Rate has remained unchanged at 5.25 percent since August 2023. This decision aims to encourage saving and curb spending to help bring inflation down to the Government-set target of two percent.

As inflation slows down month-on-month, analysts anticipate that the Bank of England might lower the Base Rate within the next couple of months, for the first time in over two years.

However, such a move is expected to adversely affect the interest rates offered by savings providers, as they typically respond to changes in the BoE's Base Rate.

An additional factor influencing savings interest rates is provider competition. Ms O’Brien explained: “Banks also take into account other providers’ rates and their own internal targets for new customers.

“For example, if they’ve already hit their target the provider may pull the deal or drop the interest rate.”

Fixed savings interest rates have been falling month-on-month. Ms O’Brien said: “The best savings account to illustrate this story is the fixed-rate bond. Back in August 2023, the top interest rate for a one-year fixed-rate bond was 6.2 percent and this stuck around for a few months.

“However, rates started to fall - slowly at first - with the top rate at six percent in November and by January the top rate for a one-year fixed-rate bond dropped quickly to 5.31 percent.”

The trend continued in February as the top rate recorded was 5.26 percent - nearly one percentage point below the peak in August. This means the best interest rate on a one-year fixed-rate bond decreased by 15 pecent during these months, and still, the Base Rate remained unchanged.

Andy Mielczarek, founder and CEO of SmartSave, a Chetwood Financial company, said: “The two-percent inflation target is inching closer, so it might not be long before the Bank of England cuts interest rates. So, now is the time for people to squeeze every penny out of the higher rates offered on their savings before they, too, start to diminish.”

Find out the best savings account and ISA deals this week, here.