Following the recent announcement that the 100 per cent state guarantee on Northern Rock savings balances would end on May 24th, the bank is increasing rates on its one and two year fixed rate bonds, says price comparison website,
Moneynet.co.uk.
Whilst existing variable rate savers are still fully protected until 24th May and existing fixed rate accounts until maturity, any new accounts do not come with this added level of comfort.
The one-year bond now offers the fourth highest rate in its field following a 0.40 per cent increase from 2.75 per cent to 3.15 per cent yesterday and is now just 15 basis points away from Post Office at 3.30 per cent in top spot.
The two-year bond, which Moneynet.co.uk says is not quite as competitive, also saw a sizeable increase from 3.20 per cent to 3.50 per cent, although still some way short of market leader
ICICI bank UK at 4.25 per cent.
With the removal of the savings guarantee for new deposits, these substantial rate increases from Northern Rock have come at a time when a number of short term fixed rates have been cut or withdrawn completely.
“With new fixed rate deposits no longer eligible for the luxury of a 100 per cent guarantee, the bank now has to compete on a level playing field and will need to offer decent rates if it is to retain and grow its savings business,” says Moneynet.co.uk’s Andrew Hagger.
“With the lesser safety net of £50,000 courtesy of the FSCS, in line with the rest of the savings market, it’ll be interesting to see whether these rate increases will be sufficient to entice customers to remain loyal to
Northern Rock.”
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