Best rates offered by Islamic banks

Best rates offered by Islamic banks

Savers searching for the best rates may notice the top deals are now offered by Islamic banks.

Latest data from Moneyfacts showed off-high street brands regularly offered the best deals when it came to one and two-year fixed bonds in the past ten years.

In fact, the current best buy deals within these sectors were dominated by Islamic banks, forcing competition from other brands looking to maintain a prominent position within the charts, according to the information provider.

Currently the four banks offering the best rates on one-year fixed bonds - BLME, Al Rayan Bank, QIB and Gatehouse Bank - all offer Sharia-compliant savings.

Gatehouse, Al Rayan and BLME also held the top spots for two-year fixed bonds.

Although Islamic banks don’t pay interest, they pay an expected profit rate comparable to interest rates on other savings accounts.

In practice, this profit rate is usually achieved, Moneyfacts found, and Gatehouse Bank stated it had never failed to pay the rate.

Savers could see an expected profit rate of 2 per cent or more on one-year fixed bonds with Islamic banks but would be unlikely to see the equivalent in interest from mainstream brands, the provider stated.

Gatehouse for instance offers a one-year fixed term deposit account at a 2.15 per cent expected profit rate after raising the rates on three of its savings accounts in January.

Rachel Springall, finance expert at Moneyfacts, said: "Savers who look away from Islamic banks will be missing out on the best returns for their cash.

"In times of economic uncertainty, savers can take assurance that they would have the same level of protection as with any other provider under the same scheme.

"Clearly, the rise of the Islamic banks and subsequent rate improvement in the saving market should be celebrated, and as competition intensifies with challenger brands increasing rates to get a more prominent market position, it’s good news for savers all round."