Savings rates on the up

7 August 2009

There could be light at the end of the tunnel for savers who have had to endure paltry savings rates for the best part of the year, with several top deals launched this week.

Online bank Egg yesterday introduced its new instant access Egg Savings Account that offers a competitive 3.25% gross AER variable rate. The account, which is only available to new customers, includes a 2% 12-month bonus on balances up to £1million. 

There is currently only one better instant access account on the market offered by Coventry Building Society, providing a 3.3% rate including a 1.3% 12-month bonus. 

This week also saw the launch of a range of top-paying bonds in the fixed-rate savings market.

The once struggling West Bromwich Building Society is at the top of the one-, two- and five-year bond market with rates of 3.9%, 4.45% and 5.45%, respectively, after revealing its new deals.

The society was facing a possible bail-out in June due to almost £50 million of losses in the year to March, but managed to stay independent through by converting £182 million worth of debt into cash.

As a result, it has had to rely on attracting most of its cash from savers - and its latest move clearly shows that it’s battling for retail funds. 

The mutual is now the top payer over one-year and five-year for fixed-rate savings, and its three-year bond was only beaten by Britain's newest bank, Aldermore, which has a rate that is 0.05% higher at 5.05%.

Commenting on the launch, Moneynet spokesman Andrew Hagger says:

"The minimum deposit requirement of £5,000 and requirement to open the bonds online may put the product out of reach of some people, but the society will be in a good position to attract those savers now coming off 7% plus fixed rates just 12 months ago.

"West Bromwich Building Society were one of the mutuals to have its credit rating downgraded by Moody's in April which will have made it more expensive to obtain funding from the wholesale markets, hence turning their attention to retail savers with an aggressive pricing policy." 

Savers looking for a fixed-rate bond were spoilt for choice this week as Halifax (online), Alliance & Leicester and Abbey launched two-year accounts paying 4.15% on deposits of £500 for the former and £25,000 for the latter two.

The latest developments in the savings market is great news for savers, but Hagger warns that you need to act swiftly if you want to reap the rewards of the new deals. 

"Most of the recent best buy savings products have been very short lived, so if you want to grab a piece of the action, don't dither otherwise you may miss out," he says.

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