UK bank launches regular savings account with whopping 7.10% interest rate

Zopa, the digital bank based in the UK, has unveiled a competitive regular savings account boasting a hefty 7.10% interest rate. Regular savings accounts are tailored for individuals who wish to save a fixed sum each month over a set term, typically 12 months, and earn a higher interest rate than standard savings accounts as a result.

Savers can deposit up to £300 per month, allowing a maximum total deposit of £3,600 over a 12-month period. Interest is paid at the end of the term, with a full £3,600 deposit expected to earn around £255.60, bringing the total balance to approximately £3,855.60.

READ MORE: Kickers' 'durable' Back to School shoe range that 'last all year'

There's no minimum deposit required to open Zopa's Regular Saver pot; however, you need a Zopa bank account and a Smart Saver first, which requires a minimum deposit of £1.

After 12 months, the regular saver converts to an easy access account with a 3.5% rate, but Zopa said customers can open a new regular saver to continue earning the higher rate, reports the Express.

Unlike many regular savings accounts, savers are allowed to withdraw money at any time without penalty. However, they'll only be able to replace the money within the monthly allowance of £300. For example, if you withdraw £500 but want to put money back in, you can only deposit up to £300.

To open the account, you must be aged 18 or over, be a UK resident and have tax residency in the UK, and have a Zopa bank account and Smart Saver account.

Zopa has launched a new product alongside its current account, 'Biscuit', which allows customers to earn up to £256 annually through a mix of cashback and interest.

The account offers 2% annual interest on all balances and provides 2% cashback on household bills paid by direct debit, capped at £1,500 of direct debits per annum. This account also grants customers access to the 7.10% AER regular savings account.

What other options are available?

Savers can deposit up to £200 each month, meaning the pot can increase to a total of £1,200, with withdrawals not permitted until the account matures.

With a maximum monthly investment of £200, savers will accumulate £1,227.53, including £27.53 in interest. So, while it may boast a market-leading AER, its six-month term restricts the total interest earned.

First Direct offers a competitive 7% AER over 12 months. The account permits a higher monthly deposit of £300, which totals up to £3,600 in savings over a year.

At the end of the term, savers will have £3,736.50, including £136.50 in interest. Although First Direct's interest rate is lower, the longer term and higher deposit limit make it a potentially better option for accumulating larger savings.

Other providers offering competitive interest rates on regular accounts include The Co-Operative Bank with a 7% AER, Nationwide Building Society with a 6.5% AER, and Lloyds Bank with a 6.25% AER on its Club Lloyds account.