Savings Accounts Safe From Rate Cuts
Although we have seen two recent cuts in the base rate from the Bank of England, many savings accounts are keeping their interest rates respectably high.
According to financial data, lenders are continuing to offer good deals on their savings accounts in an attempt to create fresh funds and up competition.
Since last week's rate cut to 5.25% there is now strong competition within the savings market, particularly for 'best buy' deals. Savers now have the opportunity to strike while the interest offers are high and earn themselves some tax-free interest over the coming year.
Currently the best instant access savings accounts are paying up to 6.55% annual interest, up 1% from last year, while the average instant access account rate is up to 3.72% from last year’s 3.3%.
Notice accounts, that require anywhere from 30 to 90 days notice for any withdrawal, now offer an average annual interest rate of 4.13%, again showing an increase by surpassing last year's 3.51%.
However, analysts warn that many banks and building societies have still to respond to the latest rate cut, which may make a difference to average figures and the potential of annual interest to be earned.
As a result of the crisis at Northern Rock many lenders were finding it increasingly difficult to borrow money from each other in order to finance their mortgage businesses. They have therefore turned their attention towards attracting new cash inputs in the form of deposits, which they gain by offering generous interest rates on savings accounts.
One analyst said, "It would appear that many financial institutions are now favouring a strategy where funds are brought in via retail deposits rather than relying so much on funding their lending through the money markets."
Now that Northern Rock is fully supported by the Treasury and the tax payer, it too has launched a campaign offering up to 6.71% on its fixed-rate bonds. So far the campaign is proving quite a success and has seen an inflow of funds from savers. At the same time, the troubled bank has won back the trust of a sizable amount of customers.
Published on February 13, 2008
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