Banks Boost Regular Saver Rates to 7.5% its Highest in Years Amid Competition

Savers in the UK can now secure some of the highest interest rates seen in years, with several banks and building societies launching regular savings accounts paying up to 7.5% AER.

Principality Building Society currently leads the market with a six-month regular saver account offering a fixed 7.5% AER on deposits of up to £200 a month.

This account is open to both new and existing customers, giving savers a rare opportunity to boost returns at a time when easy-access accounts typically pay much less.

Other top-paying regular savers include Zopa's new account, which offers 7.1% AER, as well as deals from First Direct and The Co-operative Bank, both of which offer 7% AER.

These accounts also require customers to set aside money every month, usually up to £300, and in most cases require you to hold a current account with the provider.

All these accounts are protected by the Financial Services Compensation Scheme (FSCS), which guarantees up to £85,000 per person, per institution. Interest is usually paid at the end of the term.

Most regular savers do not allow withdrawals until the end of the deal, and exceeding the monthly limit won't earn the headline rate.

Sarah Coles, head of personal finance at Hargreaves Lansdown, says: "The headline rate on a regular saver looks great, but bear in mind the impact of drip-feeding the money in... you're effectively getting half the advertised rate on average."

In practice, that means saving £300 a month in a 7% regular saver actually earns around 3.87% overall because each deposit spends time earning interest.

Despite the restrictions, these accounts suit people who can commit to routine saving and want a guaranteed return. They're ideal for people who want to start saving habits by drip-feeding cash monthly.

The surge in rates comes as competition between banks heats up, with providers looking to attract new customers. Savers should check the terms carefully, as the top rates are generally only available to those who can commit to leaving money untouched for the long term.