The Bank of England may have slashed interest rates by a further quarter point last week, but it doesn't mean your savings should suffer.
Last week, the Bank of England cut its base rate by 0.25%. And while many borrowers welcomed the decision, savers probably weren't as happy.
After all, you'd expect rates savings rates to fall after any cut in the base rate.
However, according to research by Moneyfacts, although the base rate of 5.25% is now at the same level as it was this time last year, it's still a good time to squirrel away those savings.
Because while the base rate may have lowered, some savings rates are far higher than they were 12 months ago.
Here's a quick comparison of the best no notice accounts (not including bonus rates) now compared to last year:
Bank or BS |
Rates at | Bank or BS |
Rates at |
|---|---|---|---|
Anglo Irish Bank | 5.55% | West Bromwich BS | 6.55% |
Birmingham Midshires | 5.5% | Anglo Irish Bank | 6.3% |
Derbyshire BS | 5.45% | Heritable Bank | 6.21% |
Manchester BS | 5.41% | Bradford & Bingley | 6.2% |
Mansfield BS | 5.35% | Beverly BS | 6% |
Heritable Bank | 5.35% | Birmingham Midshires | 5.75% |
*Moneyfacts did not include internet-only accounts in this table.
As you can see, although the base rate is the same, there is a whole percentage difference between the interest rates of the two top paying accounts from now and last year. While rates last year lingered around the 5% mark, this year you're more likely to find rates of 6% or more.
Star Savings Accounts
Moneyfacts says the enticing rates are partly due to the intense competition within the savings market. With many institutions vying to grab a spot on the best-buy tables, rates have rocketed in the last few months.
The Star Easy Access Account from West Bromwich pays a massive 6.55% on balances from £1. The rate is guaranteed to be at least 0.5% above the Bank of England base rate until at February 2009 and you are allowed twelve penalty free withdrawals per year.
If regular access is important to you, you could always opt to stash your cash with Anglo Irish Bank, which includes the added bonus of offering free CHAPS withdrawals, so you can get your money quickly when you need it.
Similarly, ICICI and Icesave offer 6.41% and 6.05% (from 15th Feb) AER respectively on their easy access savings accounts.
Another possible reason for the increased rates is because some institutions want to secure funds via retail deposits rather than rely on borrowing from the money markets.
Beleaguered bank Northern Rock may be one institution banking on this safer strategy. While its typical loan rate is now 12.9% -- hardly a best buy rate, its Tracker Online and Silver Surfer savings accounts both offer a juicy 6.49% (although the tracker online does include a 1.24% bonus for the first year).
Savings Stumblers
However, it's not all good news. Egg lowered the rate on its Egg Savings Account by a whopping 0.5% after the Bank of England's announcement last Thursday.
And the moral of the story?
As always, shop around. Don't resign yourself to a lower interest rate on your savings just because the chaps in Threadneedle Street said so.
Banks are changing their attitudes towards savings and retail deposits. If your money is stuck in a second division savings account, take your money and go elsewhere.
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