Aldermore Bank: challenger bank that's topping the best buy tables

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piggy bank with glasses and...

Aldermore Bank is not one you'll find on the high street. You will find it at the top of the best buy tables though!

If you want to get the top interest rate on savings locked up for three or more years, then forget the big high street banks. Aldermore Bank is the latest non-mainstream name to top the tables, having bumped up the rates on its three-, four- and five-year savings bonds.

The interest rate on the three-year bond is jumping from 2.20% to 2.70% AER, on the four-year bond it's increasing from 2.65% to 2.90% and on the five-year deal it is jumping to 3.10% from 3%.

Let's take a look at how these deals compare to the best of the rest in the market today.

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The best three-year fixed rate bonds

Account

AER

Minimum deposit

Account access

Aldermore Bank Fixed Rate Account

2.70%

£1,000

Online, post, phone

ICICI Bank HiSAVE Fixed Rate Account

2.70%

£1,000

Online, phone

Shawbrook Bank Fixed Rate Bond

2.55%

£5,000

Online, post

Axis Bank Fixed Deposit Account

2.55%

£10,000

Post, branch

Bank of London and the Middle East Premier Deposit Rate

2.50%*

£25,000

Online



*Anticipated Profit Rate

So Aldermore now shares top spot with ICICI Bank UK, another branch you won't find on too many high streets. ICICI Bank UK, which is a subsidiary of Indian bank ICICI, has branches in Birmingham, East Ham, Harrow, Knightsbridge, Leeds, Leicester, Manchester, Southall and Wembley.

After that we have Shawbrook Bank, which has no branch network, Axis Bank UK, another subsidiary of an Indian bank, and finally the Bank of London and the Middle East, which claims to be the largest Islamic bank in Europe and is based in the capital.

The best four-year fixed rate bonds

Account

AER

Minimum deposit

Account access

Aldermore Bank Fixed Rate Account

2.90%

£1,000

Online, post, phone

Vanquis Bank High Yield

2.86%

£1,000

Online

Shawbrook Bank Fixed Rate Bond

2.85%

£5,000

Online, post, phone

Bank of London and the Middle East

2.75%*

£25,000

Online

Tesco Bank Fixed Rate Saver

2.65%

£2,000

Online, phone


*Anticipated Profit Rate

Again, we have a best buy table filled with less traditional names. And once again, Aldermore is top of
the pile.

The best five-year fixed rate bonds

Account

AER

Minimum deposit

Account access

Vanquis Bank High Yield

3.11%

£1,000

Online

Aldermore Bank Fixed Rate Account

3.10%

£1,000

Online, post, phone

Shawbrook Bank Fixed Rate Bond

3.10%

£5,000

Online, post, phone

FirstSave Fixed Rate Bond

3.08%

£1,000

Online

Melton Mowbray Building Society Fixed Rate Savings

3.04%

£1,000

Post, branch



*Anticipated Profit Rate

This time Aldermore is just pipped to the top spot by Vanquis Bank, by just 0.01%. Nonetheless it's
another incredibly competitive savings deal.

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Who is Aldermore Bank?

You won't find Aldermore Bank on the high street; it doesn't have any branches. Instead it uses 12 'regional offices' across the country to conduct its business online, over the phone or even face-to-face.

Established in 2009, Aldermore is backed by funds from a private equity investment adviser firm called AnaCap. And over the last year or so it has offered consistently competitive savings accounts, which is gradually winning over savers. In October last year it had savings worth £3.2 billion on its books. The figure today stands above £3.8 billion.

Aldermore is regulated by the Financial Conduct Authority (FCA) and covered by the Financial Services Compensation Scheme, which means that your first £85,000 in savings are completely protected.

Should you lock up your savings?

The longer that you commit your savings to a bond, the better the rate you'll get in return. You can't change your mind and get hold of your cash before maturity though, so it's a decision you need to be sure about.

So is it actually a smart move to lock your money up for three years or more at the moment? As we highlighted in What next for inflation and interest rates? the Bank of England is hinting that base rate could rise as early as this year. And while it has suggested that future rises will be slow and steady, that's not set in stone; who is to say what the economy, and subsequently interest rates, will look like three, four or five years from now?

If you believe that interest rate rises will be small and slow for the foreseeable then fixing your savings rate for a couple of years may be the right thing to do. On the other hand if you think rates will rise swiftly, locking your cash up for the long term is not such a smart move; while the rates look great today, you may soon be missing out on far juicier deals.

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