Strong competition boosts savings rates

by Gill Montia

Story link: Strong competition boosts savings rates

Despite two recent cuts in the Bank of England’s base rate, savers are benefiting from strong competition among banks and building societies.

Leading lenders are keen to reduce reliance on the wholesale money markets by increasing deposits and are therefore offering some attractive rates.

According to Moneyfact.co.uk, the financial comparison website, savings rates are as much as one percentage point higher than they were in the early months of 2007.

Last February, the base rate was at today’s level of 5.25% and the Moneyfacts “best buy” instant access account rate was 5.55%, from Anglo Irish Bank.

Today, West Bromwich Building Society is offering customers 6.55%, with the Anglo Irish Bank’s 6.3% offer coming in second.

The Icelandic bank Kaupthing Edge has added to the competition with the UK launch of an instant access savings account paying 6.5%.

For those prepared to commit to long-term savings the returns are better. This time last year, Birmingham Midshires’ 6.05% one-year fixed-rate bond was the best buy, but Anglo Irish Bank is currently offering its one-year bond at 6.75%.

Rachel Thrussell, head of savings at Moneyfacts says: “Despite the latest cut in base rate (the second in the last three months) fierce competition within the savings market, and particularly the battle for best buy recognition, means that savers have the opportunity to grab some great deals at the moment.”

Adding “Even if you take into account that some of these institutions have not yet announced their rate decisions post-base rate cut [in February], a drop of 0.25% will still leave them well in excess of those on offer last February.”