Earlier this week, the building society confirmed the rollout of a new wave of fixed-rate ISAs that have “competitive” rates. It comes amid the current cost of living crisis which is mainly caused by inflation hitting a 40-year high in the UK, which is impacting savings accounts. As it stands, the current rate of consumer price index (CPI) inflation is 10.1% and is expected to peak at 18.6% next year, according to CitiGroup.
What are the interest rates for the new savings account:
Following the Coventry Building Society announcement, the new range of ISA accounts are as follows:
- One-Year Fixed Rate ISA – 2.50% interest rate, fixed tax-free until September 30, 2023
- Two-year fixed rate ISA – 2.75% interest rate, fixed tax-free until September 30, 2024
- Three-year fixed rate ISA -2.90% interest rate, fixed tax-free until September 30, 2025
With inflation at 10.1% and expected to rise further, none of these rates can beat it, but offer savers some options.
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To combat rising inflation, the Bank of England’s Monetary Policy Committee (MPC) raised the UK base rate to 1.75%.
For this reason, financial organisations, such as the Coventry Building Society, are passing this rate hike on to their customers.
Matthew Carter, head of savings at the Coventry Building Society, explained why the financial institution is choosing to raise rates at the moment.
Mr. Carter explained: “We are committed to offering competitive interest rates to our customers and providing choices for people who are comfortable securing their savings for up to three years with some of the best ISA accounts. remunerated from the market.
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“These fixed rate accounts are a popular option with savers looking for higher interest rates as well as those who want a guaranteed rate for a fixed period.”
The savings expert explained how ISAs are likely to boost the finances of Coventry Building Society clients.
He added: “ISAs also offer unique tax benefits to savers, earning interest tax-free and not counting towards personal savings allowances.
“And we’ve made it as easy as possible to open these accounts and transfer any other ISAs they may have from previous years’ allocations, which makes a big difference for savers who have built up their savings at over the years.”
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Despite this recent study conducted by finder.com, it was found that easy-to-access savings rates have lost 13.5% of their value to inflation since 2017.
With inflation expected to rise further, concerns have been raised about what savers can realistically do with their money.
Michelle Stevens, finder.com’s banking expert, explained: “The fact that savings accounts are currently losing people a lot of money in real terms is another worrying result of the cost of living crisis.
“They remain a prudent choice for many consumers given the security they offer and the fact that they still earn you interest, but they may not be a sustainable option for many if inflation doesn’t start. not to drop soon.”
Despite this, the financial expert has consistently cited ISAs as a worthwhile investment for savers looking to bolster their finances.
She added: “However, a bear market – which many predict will get worse – also does not inspire confidence in choices such as investing or cryptocurrency.
“With the potential to earn returns above inflation also comes the possibility of losing some or all of your money.
“One option to protect your money, for those under 40, is to get an ISA. A lifetime ISA offers a guaranteed return of 25% (up to £1,000 a year), but it should only be used than to buy a first property or be retired after reaching 60, otherwise you will lose the interest on the account.
“Also, investing more in your retirement fund could be another option, as you get employer contributions and tax breaks from the government.”