Good news for savers as rates increase

18 July 2008 / by Rachel Mason
The news is full of negative stories about perusal finances, but its not all doom and gloom, because savings rates are well and truly on the up.

According to new research by Moneyfacts.co.uk, savings rates have risen by 1.30 per cent on average since December 2006, which is the last time the base rate stood at 5 per cent.

"Amongst the negative stories that have come out in recent months, there is one aspect of personal finance which continues to flourish," explains Michelle Slade, analyst at Moneyfacts.co.uk.

"Savers are seeing rates as much as 1.30 per cent higher than they were in December 2006, which was the last time base rate was at the same level."

Back in December 2006, no notice accounts, which are the most popular savings accounts, were offering 5.3 per cent, but now, this figure has hit 6.4 per cent, marking the first time the average has gone over 6 per cent for more than seven years.

"Rates on standard no notice accounts, the most popular type of account, have not been over 6% since April 2001 and then base rate was 5.50%," said Ms Slade.

Internet accounts have gone up by more than a per cent and now offer 6.51 per cent on average, and fixed rate bonds have seen a massive boost, with the average going up by 1.30 per cent from 5.85 per cent in December 2006 to 7.15 per cent now.

"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," continued Ms Slade.

"Since 1 May, Moneyfacts has received 94 changes for increased rates on savings products, even though the previous base rate decision was a 0.25 per cent cut. This is an unprecedented amount of increases following a base rate cut and is not something we have seen before."

In the last year, the number of variable accounts on offer has increased from 960 to 1,067 and the number of fixed rate accounts has gone up from 394 to 426.

"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," said Ms Slade.

"Although not everyone is in a position to save as financial pressures across the board increase, those that can need to shop around for the best deal and not let their savings get eroded by inflation in an account paying a low rate."

Ms Slade says that many banks and building societies don't even tell their own customers that they can get better deals with them, so it can be difficult to know where the best rates are. She advises savers to "shop around and make the most of your money."

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© Fair Investment Company Ltd