Providers of savings accounts which require customers to give advance notice before withdrawing cash are offering the best rates seen in nearly seven years typically, analysis has found.
The average notice account rate is now 1.15% – the highest since October 2012 when it stood at 1.19% – Moneyfacts.co.uk said.
A year ago, the average rate on this type of savings account was just 0.84% – but challenger brands which savers may be less familiar with have been driving up competition in the sector, Moneyfacts said.
Savers may find that, if they are able to wait for a fixed period before withdrawing their cash, they can achieve better rates of interest with a notice account than they might with an easy access account that would allow them to take their money out immediately.
Moneyfacts said savers will find they can beat the Bank of England base rate more easily with a notice account than with an easy access account, as 81% of deals on the market pay more than 0.75%, compared with just 37% of easy access accounts.
Rachel Springall, a finance expert at Moneyfacts.co.uk, said: “Despite easy access accounts remaining a firm favourite among savers, it would be unwise for consumers to overlook the competition that has been occurring within the notice account market.
“Indeed, notice accounts typically offer higher returns and these deals may be more attractive to those who want to avoid dipping into their savings on a frequent basis – thanks to their requirement to give notice of withdrawal.”
Ms Springall said challenger banks have been helping to drive competition.
Looking at attractive deals for someone with £10,000 to put away, Ms Springall highlighted a 90-day notice account from Secure Trust Bank paying 1.91% and a 120-day notice account from Hampshire Trust Bank paying 1.90%.
Ms Springall added that notice accounts may be an alternative option for savers who do not want to lock their money away into a fixed-rate bond.
“There is now much more choice of top rates within the notice account market and, as it continues to prosper, savers would do well to consider this type of savings vehicle and not overlook the less familiar brands who offer the most lucrative returns.”