Savers unaffected by credit crunch
Savers prepared to move their money around can take advantage of banks and building societies’ eagerness to attract retail funds, according to Defaqto.
Last time the Bank of England’s Base Rate was changed to 5% was 17 months ago in November 2006. Comparing the fixed rates available then and those available now shows massive differences. The highest available six month fixed rate bond is now paying over 1.5% more than 17 months ago on a £10,000 investment.
David Black, principal consultant of banking at Defaqto, said: “With many people thinking that the Base Rate is likely to fall further this year some of the fixed-rate products available now look outstanding value.”
Variable saving rates look set to be reduced, but with some of the newer entrants, such as Kaupthing Edge & Icesave saying that they will hold their rates for the time being, people could still maintain or better their current rates going forward if they are prepared to move their money around.
Black added: “It is clear that some financial institutions are making their decisions about fixed savings rates in the light of their own particular circumstances and are not being influenced too much by what is happening to the Base Rate. While this is the case, savers can consider taking advantage of the situation by locking into some very attractive rates. Remember though, that only balances of up to £35,000 with any one institution are covered by the Financial Services Compensation Scheme.”