It’s not all bad news for savers
However, while banks and building societies are short-changing customers in many areas, there are still some great deals available which consumers should look to take advantage of.
The credit crisis is having a two-pronged effect – on the one hand institutions are looking to recoup revenue because of the bad-debt write offs and are therefore widening margins on some products. But on the other hand, there is a severe shortage of funds available on the wholesale markets – this is where banks borrow some of the money use to fund mortgage.
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Consequently, institutions are having to pull more money in through retail deposit accounts which can then be lent out to mortgage and loan customers. This is resulting in some fantastic savings rates.
What are the best savings deals available?
Banks and building societies rely on the fact that most customers never bother switching accounts – that is why they are able to get away with manipulating their margins as they do and short-changing so many customers following Bank rate changes.
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However, the best accounts are paying in excess of 6.00% which is incredible, given that Bank rate is 5.25% so now is the time to break this habit of inertia – if you are earning a poor rate on your savings, or you provider has slashed the rate by more than the recent cut in Bank rate, then move your money elsewhere.
When comparing deals watch out for catches such as introductory bonuses, or ‘easy access’ accounts that penalise you for making withdrawals. For example, Alliance & Leicester’s esaver is advertising a rate of 6.50%, but you do not earn any interest in months when you make withdrawals so you could end up earning significantly less than that over the course of a year.
If you dip in and out of your savings, Kaupthing Edge has the best catch-free easy access account. It pays 6.50% on balances above £1,000. Alternatively, ICICI Bank also has a competitive deal with no strings attached – its Hisave account pays 6.16%. Another big plus with the ICICI Hisave account is that the rate is available on balances above £1.
Bradford & Bingley also has a competitive deal for those with less than £1,000 to deposit. Its Internet Saver 2 account pays 6.15% on balances of £1 or more.
If you are willing to lock your money away, you can earn an even higher rate on your savings. Kaupthing Edge is paying 6.86% on its one-year fixed rate bond.
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