Bank increases interest to 4.4% on savings account and earns 'excellent' rating

Digital bank LHV has increased the interest on its fixed rate savings account to 4.4% AER, earning an "excellent" Moneyfacts rating.

The interest rate is fixed for one year, and savers can launch the account with a minimum deposit of £1,000. Fixed-rate accounts add a layer of certainty to saving, as they enable people to lock in an interest rate for a set length of time. However, they typically come with more restrictions, such as a limit on withdrawals, making them a better option for those who don't need immediate access to their money. Commenting on the deal, Caitlyn Eastell, spokesperson at Moneyfactscompare.co.uk, said: "LHV Bank has increased the rate on its one-year fixed rate bond this week by 0.20%. Now paying 4.40% AER on its maturity, the rise improves its position within its sector.

"The deal may appeal to savers searching for a guaranteed return, but as is common with a fixed rate bond, earlier access and further additions are not permitted."

She added: "On assessment, the deal earns an Excellent Moneyfacts product rating."

To launch the fixed-rate bond, people must open an LHV current account, and up to £1million can be deposited overall.

Based on the minimum deposit and current interest rate, the estimated balance after 12 months would be £1,044, including £44 worth of interest.

How does the account compare?

OakNorth Bank is currently topping the board for one-year fixed rate accounts with an interest rate of 4.45% AER. Savers can launch the account with just £1, and up to £500,000 can be deposited overall. Interest is paid on maturity, and withdrawals are not permitted.

Habib Bank Zurich is just behind with a 4.44% AER on a minimum deposit of £5,000. Up to £1million can be saved overall, and withdrawals are not allowed until the term ends.

Atom Bank also places competitively with a 4.4% AER. Savers can launch the account with just £50, and up to £100,000 can be deposited overall. Interest is paid on the anniversary of opening.

Savers have been urged to act as billions of pounds held in fixed rate savings accounts are set to mature. Brits could see their returns fall by hundreds of pounds as their higher interest fixed rate deals draw to an end, with millions moving on to providers' variable rate savings accounts.

Kevin Mountford, co-founder of the savings platform Raisin UK, said: "With over £116 billion in fixed-rate savings set to mature this year, too many savers risk sleepwalking from [interest rates of] 4.5% to 2.5%."

He added: "More than half the nation is at risk of a rate shock if they let their deals lapse. Loyalty may feel safe, but in savings, it is usually costly, and your bank's default option is rarely the best one.

"Short-term fixed deals, or micro-fixes, are a smart halfway house. Think of them as a power nap for your money, long enough to earn a decent return without tying it up for years.

"This maturity crunch should be a wake-up call. Taking a few minutes to review your accounts could be the easiest pay rise you will ever give yourself."