HSBC raises interest rate on Serious Saver account to market-leading 3.10%
Is this increased rate the sign of a bigger trend for interest rates on cash deposits?
HSBC has today raised the maximum variable rate on its Serious Saver account to a market-leading 3.10% p.a., up from the previous 3.00% p.a. This is undoubtedly one of the highest, if not the highest, interest rates on offer for a savings account in today's low-rate environment.
There is of course a catch; this interest rate is only on offer for the first four months after opening the account and it's for new account-holders only. After the first four months the interest rate will drop back to 1.40% p.a., which is actually lower than the previous base rate of 1.60% p.a. Plus, you can't make any withdrawals from the account if you want to earn the maximum variable interest rate of 3.10% p.a.
This style of interest rate, known as a honeymoon rate or an introductory rate, is really common. It's a way for banks to entice new customers with a competitive headline rate for a limited amount of time, knowing that after the period ends the customer is likely to become complacent and stay with the account anyway.
Before today, one of the highest interest rates on offer was the RaboDirect High Interest savings account with a rate of 3.05% p.a. This is also a honeymoon rate for the first four months only, after which customers will earn the ongoing base rate of 1.80% p.a.
Is this the start of a positive interest-rate trend?
Maybe. HSBC's new rate of 3.10% p.a. is certainly exciting, as we haven't seen many accounts offer interest over the 3% mark for a long time. While interest rates on savings accounts are still generally going down, we've seen term deposit interest rates gradually climb higher over the past three months.
So if you're looking for a safe place to store your savings, term deposits are becoming increasingly attractive. You can earn well over 3.00% p.a with a term deposit, but you'd have to be willing to lock your money away for up to five years.