Earlier this week, the building society confirmed the rollout of a new wave of fixed rate ISAs which have “competitive” rates. This comes amid the current cost of living crisis which is being primarily caused by inflation reaching a 40-year high in the UK, impacting savings accounts. As it stands, the current rate of Consumer Price Index (CPI) inflation is 10.1 percent and is expected to peak at 18.6 percent next year, according to CitiGroup.
What are the interest rates of the new savings account:
Following Coventry Building Society’s announcement, the new range of ISA accounts are as follows:
- One year Fixed Rate ISA – 2.50 percent interest rate, tax-free fixed until September 30, 2023
- Two Year Fixed Rate ISA – 2.75 percent interest rate, tax-free fixed until September 30, 2024
- Three Year Fixed Rate ISA -2.90 percent interest rate, tax-free fixed until September 30, 2025
With inflation at 10.1 percent and projected to increase further, none of these rates are able to beat it but do offer savers some options.
To combat the rising inflation rate, the Bank of England’s Monetary Policy Committee (MPC) has raised the UK’s base rate to 1.75 percent.
Due to this, financial organisations, such as Coventry Building Society, are passing down this rate hike to their customers.
Matthew Carter, the head of Savings at Coventry Building Society, outlined why the financial institution is choosing to raise rates at this time.
Mr Carter explained: “We are committed to offering competitive interest rates to our customers and providing choices for people who are comfortable fixing their savings for up to three years with some of the market’s top rate paying ISA accounts.
“These fixed rate accounts are a popular option with savers looking for higher rates of interest as well as those who want a guaranteed rate for a set period.”
The savings expert outlined how ISAs are likely to boost the finances of Coventry Building Society’s customers.
He added: “ISAs also have unique tax relief benefits for savers, earning interest that’s tax-free and doesn’t count towards Personal Savings Allowances.
“And we’ve made it as straightforward as possible for people to open these accounts and to transfer any other ISAs they may have from previous years’ allowances, making a big difference to savers that have built up their savings pots over the years.”
Despite this recent research carried out by finder.com, found that easy-access savings rates have lost 13.5 percent of their value against inflation since 2017.
With inflation expected to rise further, concerns have been raised as to what savers can realistically do with their cash.
Michelle Stevens, the banking expert at finder.com, explained: “The fact that savings accounts are currently losing people a lot of money in real terms is yet another worrying outcome from the cost of living crisis.
“They are still a prudent choice for many consumers given the security they offer and the fact that they do still earn you interest, however it may not be a sustainable option for many if inflation doesn’t start to come down soon.”
Despite this, the financial expert still cited ISAs as a worthwhile investment for saves looking to boost their finances.
She added: “However, a bear market – that many predict will get worse – isn’t inspiring confidence in choices like investing or cryptocurrency either.
“The potential to get inflation-beating returns also comes with 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 25 percent return (up to £1,000 per year) but it must only be used to buy a first property or taken out after reaching 60 or you will forfeit the interest on the account.
“Also, putting more into your pension pot could be another option as you get employer contributions and tax relief from the Government.”