Banks have enjoyed access to cheap funding since the UK Government introduced the Term Funding Scheme in August 2016.

This allowed banks to borrow money close to the ultra low Bank of England interest rate.

With the scheme now drawing to a close, banks will be more reliant on customers’ deposits to fund their activities and will therefore have to offer more generous rates for savers than before.

Among the best rates currently available, Atom Bank has a product which has a one-year fixed rate of 1.95% with a minimum deposit of just £50. Investec has a similar product with a rate of 1.9% although the minimum investment into this account is £25,000.

If banks are trying to lure investors into their savings accounts, they are likely to have to up their game.

Paul Richards, chairman of cash management provider Insignis Cash Solutions, says we ‘could see a one-year term account reaching 3%’ in the not too distant future.

This is still short of the dividend yield on the FTSE 100 which currently stands at 3.67%.

And by investing in equities you also potentially set yourself up for capital gains if the price of the share you are invested in goes up.

Though of course share prices can also fall, something which was highlighted during the global market sell-off earlier this month.

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