Starling Bank hikes fixed savings rate to 5.25%

Starling Bank has hiked the rate on its fixed savings which has shot up from 3.25% to 5.25% - but how does it compare to the rest of the market?

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(Image credit: ADRIAN DENNIS / Contributor)

Starling Bank has hiked the rate on its one-year fixed savings account for the first time since quietly coming into the saving market last year - up from 3.25% to 5.25% AER.

Alexandra Frean, chief corporate affairs officer at Starling said the jump in the rate was "in response to Bank of England changes in interest rates”.

The Bank of England increased its interest rate to 5.25% today (3 August) - the 14th consecutive rise and the highest seen since 2008.

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The move also comes ahead of new consumer duty rules and the FCA telling banks that they must give better rates to savers or face ’robust’ action. 

We look at who can get the rate and how it compares to other fixed savings on the market.

Starling Bank’s saving products

Starling is not known for offering savings products as the bank’s focus has been on current and business accounts since launching in 2014 by Anne Boden, now the former CEO. Its key attraction has been ease of use and providing users with tools that help them better manage their money.

But the mobile only bank launched its first savings product in December 2022, offering 3.25% on a one-year fixed saver with a minimum balance of £2,000. 

The rate has now hit 5.25% and is available to existing customers who hold a Starling Personal Current Account. 

It is the only savings product that Starling Bank has on offer, but unlike some other providers, Starling allows its customers to open and hold multiple savings accounts at one time. 

Although the hike is good news for savers, we look at how it compares to other one-year fixed savings accounts on the market? 

The best one-year fixed savings 

Starling’s rate is in line with the current Bank of England base rate of 5.25% - and although it still does not beat inflation which is at 7.9%, can Starling’s offering be beaten? Here’s what you can get elsewhere. 

Although some of the banks with ‘top rates’ are asking for a hefty minimum deposit to open accounts, some that sit just under the 6% bracket can be opened with just £1. 

For example, you can earn 5.95% AER on OakNorth Bank’s one-year fixed saver, and you can start saving with just £1. 

Starling Bank’s rate is good news for savers, even though it isn't the top rate available. It still doesn’t compete with the top 10 one-year fixed savings rate, where the majority are offering around 6% or more. 

Kalpana Fitzpatrick, MoneyWeek’s senior digital editor, added: “Fixed savings are great for anyone saving for the short-term, but don't forget, these rates do not beat inflation and for long-term savings (10 years or more) investing can still deliver stronger returns - and while there is more risk involved, investing can help your money grow in line with inflation.”

FCA pushing banks to offer better rates on its savings accounts

Following the FCA’s new Consumer Duty rules which came into force on 31 July, the regulator has warned savings providers to pass on interest rate rises quicker than they have been. 

The crackdown comes after the FCA found that the largest bank providers had only passed 28% of interest rate rises onto easy-access accounts. Around 51% of rate increases were passed onto one-year fixed savings accounts, but that’s still just half. 

The scrutiny that bank providers will face as a result falls under the FCA’s 14-point action plan. This involves: 

The regulator has notified providers that if fair rates are not offered on its saving products, it will take action.

Last month, banking giant Santander boosted its rates to give account holders a better deal ahead of the new consumer duty rules. We expect other banks to follow suit. 

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Vaishali Varu

Vaishali graduated in journalism from Leeds University and she has experience working with the likes of Leicester Mercury, Inews and The Week. She also comes from a marketing background, where she has done copywriting and content creation for businesses. 

Currently writing about all things personal finance, Vaishali is passionate about finding the best deals around, whether it's the best credit cards or the cheapest personal loans, as well as sharing top money hacks to help people save and better manage their money.