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Coventry Building Society’s Limited Access savings account closed to new customers just hours before its rate was due to increase to a market-leading 3.25% AER.
The provider told us this came after weeks of strong demand, following news last month that it would increase the then rate of 2.85% AER by 0.4% on 6 January.
Excitement over the account came despite caveats which meant withdrawals were restricted to six times a year, after which customers would lose out on savings interest.
If you missed out on the deal, don’t despair. There’s currently fierce competition among providers to attract new savers following several Bank of England base rate rises, and average savings rates are at their highest levels in more than a decade.
Here, Which? takes a look at how other instant-access accounts compare.
Why was the Coventry BS account withdrawn?
Coventry Building Society’s Limited Access account was withdrawn on 5 January for new customers. However, as it’s a variable-rate account, anyone who had already opened it will still benefit from the rate increase, and will be earning 3.25% AER.
While the closure may be disappointing news for savers who had hoped to grab the market-leading rate, it’s not uncommon for competitive accounts to be closed at short notice.
Many challenger banks and building societies have small funding targets, which mean accounts aren’t around for long – especially given the current heightened demand. Once a provider has received enough cash to reach its target, it pulls the deal.
Savers wanting to grab a top-rate account need to act fast – but always check whether there are any account restrictions that might not suit your circumstances. For example, limits on the number of withdrawals you’re allowed to make, or penalties for early closure.
Rachel Springall, finance expert at Moneyfacts, says: ‘This movement in the market reiterates how imperative it is for consumers to act quickly to secure a top deal. Challenger banks and building societies continue to offer some of the best returns in the market, but as the name may suggest, limited editions don’t tend to sit on the shelf for very long.
‘Easy access accounts remain favourable for consumers who want flexibility with their cash. Clearly, there is competition in this arena, but savers may not have long to grab such lucrative offers and sitting on the fence could see them miss out.’
What are the best instant-access savings rates?
If you missed Coventry Building Society’s account, there are plenty of other competitive instant-access products to choose from.
This table shows the top rates for instant-access savings accounts, excluding products with limited withdrawals or other restrictions.
Source: Moneyfacts. Correct as of 6 January 2023, but rates are subject to change. *Accounts from Al Rayan Bank are Sharia-compliant, and so pay an expected profit rate (EPR) as opposed to an annual equivalent rate (AER).
As you can see, the best instant-access savings rate is 2.86% AER, offered by Zopa. There is no minimum deposit required to open this account, and the rate rises to 3.26% AER if you choose a Boosted Pot product that requires 95 days’ notice on withdrawals.
Zopa also topped our table of best and worst savings providers for 2022-23 and was named a Which? Recommended Provider, achieving a customer score of 85%.
With the exception of Al Rayan Bank’s Everyday Saver deal, all the other restriction-free instant access accounts can be opened with just £1, which is ideal if you don’t have a huge amount to save.
Will savings rates continue to rise?
While there are signs that rate rises may have slowed for fixed-term accounts, instant-access accounts are still seeing a boom. Last month, the average easy access rate rose to 1.43% – the highest it’s been for more than 13 years, according to Moneyfacts data.
These interest rate rises are largely tied to increases to the Bank of England base rate, which is now 3.5%. The base rate dictates the interest banks have to pay to borrow from the Bank of England – as it rises, they tend to look to savers’ deposits for a cheaper way to fund their borrowing.
If it rises again when the Bank’s Monetary Policy Committee (MPC) meets in February, we could see savings rates increase further.
Despite rising rates, no accounts can match or beat the current rate of inflation, which means everyone’s cash is losing value in real terms (ie it can’t buy as much as it once could). This means it’s more important than ever to make sure your savings are earning as much interest as possible.
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