Savings account rates drop but internet savers appear to thrive

17 June 2008 / by Joy Tibbs
According to a Sainsbury's Finance report, Interest rates on savings accounts have dropped considerably since the top 10 accounts were identified by Moneyfacts in February 2005.

The 10 best-buy savings accounts – based on accounts with a £1,000 balance – were paying an average 5.23 per cent interest rate, topping the Bank of England base rate at the time by 0.48 per cent.

Meanwhile, Sainsbury's Finance points out that seven of these named savings accounts are paying rates below the base rate. The average rate for these seven accounts is just 4.63 per cent, slipping 0.37 per cent below the official Bank rate.

Interestingly, the three included in the 2005 top 10 that are still paying above the base rate are all internet savings accounts. The Sainsbury's Internet Saver and Yorkshire Building Society e-Saver account each pay 5.50 per cent, while the Bradford & Bingley eSavings account offers 5.30 per cent.

Savings manager at Sainsbury's Finance, Neil Cameron, said: "Rates on savings accounts move frequently so it's important to keep an eye on them and ensure that you are receiving a fair and competitive return. Savers should be aware that an account that features in today's best buys will not necessarily be such a great deal tomorrow."

The Sainsbury's Internet Saver was ranked number one internet savings account by Moneyfacts in its new 36-month consistency rakings, which tracks the rates paid by savings accounts over the past three-years.

Furthermore, research from Defaqto shows that it is the only instant or easy access savings account that has consistently paid a gross AER interest rate on a balance of £1 that is equal to or above the base rate every month since January 2005.

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