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Last week, Cahoot announced raised rates for its Fixed Rate Bond accounts to help benefit savers. The digital bank is an internet-only division of Santander UK which is only accessible via online banking. This latest interest rate hike comes amid soaring inflation which has been diminishing returns for savers.
Following this new launch, the digital bank’s range of Fixed Rate Bonds have the following interest rates:
- One Year Fixed Rate Bond: 4.30 percent AER/Gross from 3.70 percent AER/Gross
- Two Year Fixed Rate Bond: 4.70 percent AER/Gross from 4.10 percent AER/Gross
- Three Year Fixed Rate Bond: 4.80 percent AER/Gross from 4.20 percent AER/Gross
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According to Cahoot, savers who put away £10,000 in a Three Year Fixed Rate Bond product will see annual returns of £480.
All savers can see what returns they can get by using the Bank of England savings calculator.
A Fixed Rate Bond can be opened with only a £500 deposit and with a maximum balance of up to £2million.
It should be noted that all savings accounts are protected by the Financial Services Compensation Scheme (FSCS) up to £85,000.
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As it stands, Consumer Price Index (CPI0 inflation in the UK is at 9.9 percent which is a slight drop from the previous month.
However, inflation is expected to remain high for the next year as the country faces multiple financial pressures.
One of the consequences that arise from this is that savings accounts see diminished returns from their interest rates.
In light of this, the Bank of England has raised the nation’s base rate to 2.25 percent in an attempt to handle inflation.
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Alice Haine, a personal finance Analyst at Bestinvest, outlined the impact of the central bank’s decision.
Ms Haine explained: “Consumers may now be able to find easy-access accounts with rates as high as 1.85 percent and fixed-interest rates of 3.75 percent – the highest level in more than a decade thanks to the Bank of England ’s spate of interest rate rises – but this is still no match inflation of almost 10 percent.
“The only consolation is that the BoE is widely expected to raise the base rate again next week, a move that should see savings rates edge up further.
“The key for savers looking to mitigate the damaging effect of inflation is to shop around for the best deals on the market.”
With the cost of living crisis still hurting families, the finance expert is urging people to set aside enough money as possible for a rainy day.
She added: “Remember, it is vital to have some cash set aside for life’s emergencies, particularly in this ever-present cost of living crisis.
“While the recommendation is to hold onto three to six months’ worth of monthly expenses, those with nothing set aside should strive to save a small amount towards that target every month.
“Each contribution, however small, will help to ease the financial stress that can come with having no backup funds in place.”
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