Rates make it a good time to save

18 July 2008

Competition among banks and building societies for customers has pushed savings rates to their highest level in seven years.

According to Moneyfacts, the financial information firm, savings rates are as much as 1.3 per cent higher now than they were in December 2006 when the Bank of England’s base rate was also at 5 per cent.

The study found that fixed-rate bonds could produce a return of 7.15 per cent on savings compared with a rate of 5.85 per cent in 2006.

Even no-notice savings accounts have shown a 1.1 per cent rise to 6.4 per cent for the best rates available during the past 18 months.

With savers wary of more volatile investments in the stock market and banks themselves facing high borrowing costs, Moneyfacts said that it had registered 94 rises in rates on savings accounts since the beginning of May.

Michelle Slade, an analyst at Moneyfacts, said: “People with existing savings or those starting to save, including first-time buyers saving their deposit, find themselves in a strong position as the banks and building societies continue to fight to tempt savers through their doors.

“Institutions are adding a wider variety of accounts to their range in order to ensure they have an account to suit every saver's needs, rather than having the saver go to its competitor.”