Fixed savings rates racing to 5%: Al-Rayan Bank launches three-year deal paying 4.9% with experts saying other banks will follow suit
- Al-Rayan Bank has launched a three-year fixed rate account paying 4.9%
- It moved to the top of This is Money best buy tables with a 4.75% one-year fix
- Experts believe we are likely to see a 5% deal hit the market in the coming weeks
Savings rates are fast approaching the 5 per cent mark with competition at the top of This is Money’s best buy savings tables at boiling point.
Al-Rayan Bank became the latest provider to lead the way after launching four new best buys.
Most notably, it has launched a three-year fix, paying 4.9 per cent – the highest fixed rate deal currently on the market.
Savers putting £10,000 in Al Rayan’s three year deal can expect to earn £1,545 in interest over the three-year period.
Savings sweet spot: Savers can now get almost 5% on their money
Andrew Hagger, personal finance expert at MoneyComms believes we may well see a 5 per cent rate hit the market in the coming weeks.
He said: ‘The fixed-rate savings market is becoming increasingly competitive, we may even see a 5 per cent fixed rate in the coming weeks if this level of activity continues.’
Anna Bowes, of savings website, Savings Champion added: ‘It’s interesting to see Al Rayan Bank bucking the trend and paying more on a longer term deal.
‘It’s a great rate from Al Rayan Bank and we may well now see rates hit the 5 per cent mark like they did last year.’
While the very best fixed-rate deals race towards 5 per cent, driven by market expectations of more base rate hikes, it is still far below the latest 10.1 per cent level of Consumer Price Index inflation recorded for March.
Al-Rayan has also launched the market leading one-year deal paying 4.75 per cent, overtaking Shawbrook Bank and Close Brothers yesterday, which launched 4.7 per cent deals.
Savers putting £10,000 in Al Rayan’s one-year deal can expect to earn £475 in interest by the end of the term.
All of Al-Rayan’s accounts require a minimum deposit of £5,000 and no withdrawals can be made until the end of the term.
All deposits made are protected under the Financial Services Compensation Scheme up to £85,000 per person.
The account can be opened online or through its digital banking app or by telephone.
Instead of paying an interest to savers, Al-Rayan Bank as an Islamic bank, invests customers’ deposits in ethical, Sharia compliant activities to generate a profit.
Profit rates are expected; however, since the Bank was founded in 2004 it has always paid at least the profit rate it has quoted to its customers.
The profit is calculated monthly and can be paid every three months to a nominated account.
Customers also have the option to retain the deposit profit in an account to be paid all together on maturity.
However, savers should consider the potential tax implications when doing this for longer term fixed rates.
What does Shariah-compliant mean?
As a Shariah-compliant bank, Al Rayan follows the laws and rules of Islam and is guided by Islamic economics.
Core Islamic principles include, not charging interest to borrow money and not paying interest on savings accounts.
Rather than listing interest rates, Sharia savings accounts therefore list how much profit savers earn through an ‘expected profit’ rate – though the outcome for savers is the same.
Money invested in a Shariah bank cannot be used to fund businesses that cause harm, such as alcohol, tobacco or gambling.
