ISA rate boost: Paragon Bank raise interest rates on ISA range following savings increase

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Savings rates struggle to get above one percent at the moment as the Bank of England keeps the base rate at all time lows but despite this, retail banks are regularly increasing what’s on offer. Recently, Paragon Bank boosted its savings rates across a number of products and savers can now earn relatively decent returns.

On top of these increases, Paragon Bank announced today it will boost the interest rates on its one, two, three and five-year fixed rate ISAs.

The new rates will be available to savers from tomorrow, July 2.

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Just as with the savings accounts, these ISAs can be opened and managed online, over the phone or by post and are available to both new and existing customers and interest can be paid on a yearly or monthly basis.

The products impacted by the rate increase are as follows:

  • 1 Year FR ISA (previous interest rate of 0.55 percent AER, increasing to 0.61 percent AER)
  • 2 Year FR ISA (previous interest rate of 0.60 percent AER, increasing to 0.85 percent AER)
  • 3 Year FR ISA (previous interest rate of 0.70 percent AER, increasing to 0.95 percent AER)
  • 5 Year FR ISA (previous interest rate of 0.80 percent AER, increasing to 1.05 percent AER)

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Derek Sprawling, a Savings Director at Paragon Bank, said: “Savers appreciate the benefits of building tax free savings and we always aim to support customers to do that by offering the most competitive rates we can.

“It’s easy for people looking for a competitive deal to open and manage an account with Paragon and they can choose to apply online, by telephone or by post.

“Our 28-day rate guarantee ensures that any customers part way through the application process already, or with an imminent maturity with us, will also benefit from our new rates automatically.”

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On top of boosting rates, banks and building societies have launched a number of cash incentives to bring in new customers.

Companies such as HSBC and Nationwide have offered switching bribes to those who are willing to move their funds across.

However, Rachel Springall, a Finance Expert at Moneyfacts.co.uk, recently warned savers do not have much time to take advantage of these deals.

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Ms Springall urged savers to take action quickly where possible on this: “Consumers looking to make their current account work harder for them may wish to review their current package in light of new incentives being launched onto the market. #

“As we have seen before, switching perks can be withdrawn quickly and consumers could not only receive a cash perk or gift card for switching, but they could earn other rewards or save some money by moving away from their existing current account provider.

“Banking customers could earn £125 in cashback by switching to first direct or HSBC or receive a £150 gift card from Virgin Money right now. Those consumers looking to save a bit of money in their account will find a few options paying credit interest, including Virgin Money which pays 2.02 percent AER on balances up to £1,000 on its M Plus Account (£20 a year gross) and Santander which pays 0.30 percent on its 123 Current Account on balances up to £20,000 (£60 a year gross). In a low interest rate environment these are good choices, particularly as many accounts had their credit interest rates cut over the past few years.

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“Those looking to borrow would be wise to compare overdraft tariffs carefully as many accounts now charge more than 30 percent EAR, whereas one of the best deals with a lower charge comes from Starling Bank at 15 percent EAR.

“In addition, first direct currently has a £250 interest-free overdraft (thereafter charging 39.9 percent EAR) and is one of the providers paying a cash switching incentive of £125. However, the cashback offer for using the CASS is expected to be withdrawn in two weeks’ time, so consumers need to act soon to take advantage.

“It’s important that care is taken when comparing offers and consumers would be wise not to get blindsided by an upfront perk, as it’s the overall package of a deal that must be weighed up before they commit to a new current account. The cost to borrow using an overdraft, as well as any other benefits, are worth comparing carefully before someone commits to moving their account.”

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