Savers haven’t been handed much good news in 2020, even before National Savings & Investments made heavy cuts to its best buy rates three weeks ago.
The planned reductions from the Treasury-backed bank, which come in next month, have effectively pulled the rug out from underneath what had looked like a slight recovery in savings rates.
A wave of money looking for a new home has been credited with putting more downward pressure on rates from banks and building societies.
But savers have the hint of a better outlook in the form of two new banks offering competitive savings rates – JN Bank UK and DF Capital – which will help shore up the best buy tables.
But who are they, what do they pay, and is savers’ money safe?
New savings banks have popped up recently and are offering competitive deals to savers
The best buy provider keeping it quiet
One of the banks that has recently opened accounts to savers is DF Capital, the banking arm of publicly-listed commercial lender DF Capital Holdings.
Its roots are much shorter than JN Bank, on which we give more detail below, given that it was founded just four years ago. It secured its banking licence on 2 October having applied in August 2019.
Rather than going through the Bank of England’s ‘mobilisation’ process, something often described as ‘training wheels’, which lets new banks operate with a small limit on how much money they can hold, it has opened up straight away and headed direct to the top of the best buy tables with its first savings products.
However, it has done so quietly, with what The Savings Guru’s James Blower, an industry expert and adviser to savings banks, called a ‘soft launch’.
But there is nothing soft about its rates. It offers 1.18 per cent on £1,000 or more on a one-year fixed-rate, the best non-Sharia rate in our best buy tables and the second-highest-paying account overall after Al Rayan Bank’s account paying 1.26 per cent.
Meanwhile it also offers a 1.12 per cent 90-day notice account, which is the best rate on the market, according to the analysts Savings Champion.
|Account||Rate||Position in the best buy tables|
|One-year fixed-rate||1.18%||2 (best non-Sharia rate)|
Both accounts can be opened online with £1,000 or more, while the bank will soon launch 18-month and two-year fixed-rate bonds too.
Given the recent cuts to short-term fixed-rate savings deals, and given its status as a new bank, Blower predicted these best buy rates would be cut ‘in the next few days’, meaning savers should act fast if they wish to take advantage.
The deposits will likely be used to fund DF Capital’s commercial lending, where it offers inventory and supply chain finance to UK businesses, including for vehicles and agricultural and industrial equipment.
Once again, all savings of up to £85,000 are covered by the FSCS.
Britain’s first Caribbean bank
JN Bank UK is not a totally new name in town. It began as Jamaica National Building Society in 1874 and has served the Caribbean island ever since, with offices in Toronto, Florida, and the UK.
In return, it is offering an easy-access savings deal paying 0.55 per cent on £1,000 or more, which puts it at twelfth place in This is Money’s best buy tables. There is also a 0.8 per cent-paying one-year fixed savings deal.
Restructured from JNBS to JN Bank in 2017, it is Jamaica’s third-largest commercial lender.
It has operated on British shores since 1988, but has only been a full bank since last December, becoming the first Caribbean bank to be offered a full UK licence.
JN Bank UK is the UK arm of Jamaica’s third-largest bank and has some competitive deals
Based in Brixton, London, it makes a big deal of its links to its local community, stating on its website: ‘Can you think of another bank’s branch whose uniforms are designed by college students and made by a local tailor’.
Its branch, near Brixton tube station and the O2 Academy music venue, is open from 10am-4pm on Monday-Friday and 10am-3pm on Saturday. Outside of these hours, it says it offers the physical space to local community groups.
However, its new range of savings accounts, launched last week after it was fully licensed by the Bank of England, can only be opened online or over the phone.
All deposits are protected up to £85,000 by the Financial Services Compensation Scheme.
It previously offered a range of services aimed at immigrants from Jamaica and those with connections to the island, including a ‘vacation account’ which lets customers open an account with Canadian dollars, pounds and US dollars and hold them in Jamaican dollars – giving them access to the bank’s ATMs in Jamaica for free.
Its savings accounts are open to everyone, and will be used to fund its UK-focused loans, aimed at those doing up their home, buying or refurbishing a new car or consolidating existing debts.
|Account||Rate||Position in This is Money’s best buy tables|
|Four-year fixed-rate||1.25%||We don’t keep a table of four-year fixed-rate deals|
On loans, borrowers can borrow between £1,000 and £15,000 paid back over a term of one to five years at an APR ranging between 7.9 per cent and 24.9 per cent.
Although it has not gone straight to the top of our tables with its opening offer savings rates, ranging from the 0.55 per cent easy access to 1.3 per cent five-year fix, many of its fixed-rate deals are competitive.
Its one-year fixed-rate pays 0.8 per cent, its two-year 1 per cent, its three-year 1.2 per cent, its four-year 1.25 per cent and its five-year 1.3 per cent. All of these can be opened online or by phone with £1,000.
However, as This is Money has previously written, there is very little premium in the return for fixing for longer than one year at the moment, so savers may choose to shun this unless they think rates will get even worse over the medium term.
JN Bank UK’s sole branch is based in Brixton, south London
THIS IS MONEY’S FIVE OF THE BEST SAVINGS DEALS
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