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A banking division of Santander has recently announced an increase to the interest rate of one of its savings accounts.
cahoot, an online bank, has raised the rate of its Simply Saver (issue 2) account in a boon for regular savers.
However, experts are warning the issue of high inflation is diminishing returns from savings accounts.
As of October 9, the interest rate of this product pays customers 5.12 percent AER/gross variable rate interest for 12 months, on balances up to £500,000.
It should be noted that savers who choose to have their interest paid monthly instead of annually will get five percent gross (variable).
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As it stands, the maximum balance of the Santander offshoot’s account is £2millio but no interest is paid on balances over £500,000.
Prior to this most recent interest rate hike, the cahoot account was paying customers 4.90 percent.
This is an easy-access account which means customers can despite and withdraw money whenever they want.
The Santander savings product can be opened online for as little as £1 as either a joint or single account.
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In order to be eligible for the cahoot Simple Saver account, customers must be a resident of the UK, aged 16 or over and be registered or will register for Online Banking with a valid email address.
One of the reasons interest has been raised is due to the intervention of central banks in hiking rates to combat inflation.
Alice Haine, a personal finance analyst from Bestinvest, shared the underlying issue which is affecting how much savers are seeing from these account rate rises.
She explained: “Savers are enjoying significantly better savings rates thanks to rapidly rising interest rates, though their money is still losing value in real terms once inflation is factored in.
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“With headline inflation now in retreat, the bigger threat to people’s carefully built-up savings is the tax charges applied on the interest they earn.”
As well as this, the savings expert highlighted how inflation easing is a sign that sky-high interest rates will not be around for long.
Ms Haines added: “With interest rates either at or near their expected peak, the best savings rates may not stick around for long.
“However, with rates still as high as 5.20 percent for easy-access accounts and 6.12 percent for fixed-term accounts, the size of the pot at which savers must pay tax on the interest is still lower than it has been for years.”
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