Building Society offers competitive 7.5% interest savings account

Principality Building Society is offering a market-leading 7.5% AER on its regular savings account, bucking the trend as average interest rates fall following another Bank of England base rate cut.

Regular savings accounts typically require people to deposit a set amount each month. They work well for disciplined savers and they benefit from higher interest rates than standard accounts. Principality Building Society’s account runs for six months, and interest is paid on maturity. Monthly deposits are capped at £200, allowing for a maximum total contribution of £1,200. Based on current rates, that would earn £27.53 in interest over a year.

To launch the account, savers must be UK residents and aged 16 and over, and a minimum deposit of £1 is required.

Similar to most other regular savings deals, withdrawals are not permitted until the account matures.

While Principality may lead with an Annual Equivalent Rate (AER) of 7.5%, its six-month term limits the total interest earned to just £27.53.

In contrast, online bank Zopa offers a 7.1% AER over 12 months with a higher limit of £300 per month, allowing savers to amass £3,600 in total savings. Interest is paid at the end of the term, with a full £3,600 deposit expected to earn around £255.60, bringing the total balance to around £3,855.60. Unlike many regular savings accounts, savers can withdraw money from the Zopa savings account at any time without penalty.

First Direct places just behind with a competitive 7% AER over 12 months. Monthly deposits are capped at £300, which totals up to £3,600 in savings over the course of a year. At the end of the term, savers will have £3,736.50, including £136.50 in interest. Withdrawals are not permitted until the term ends.

The Co-operative Bank is also offering a 12-month 7% AER on its Regular Saver (Issue 1).

Savers can put away up to £250 per month, building total savings of up to £3,000, and can earn up to £114.21 in interest. This account also offers more flexibility, as people can make withdrawals without facing a penalty.

Savers are being urged to lock in higher interest rates while they’re still available, after the Bank of England cut the Base Rate from 4.25% to 4% last Thursday.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Savers will feel frustrated to see an abundance of providers cut rates since the Bank of England Base Rate cut. More than 20 providers have cut since last Thursday. Over the past week, the Moneyfacts Average Savings Rate has dropped from 3.50% to 3.47%.

“Savers need to keep a close eye on the market for any vanishing accounts and ensure they abandon their loyalty if it is not being rewarded with a decent savings rate.”