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Savings rates soaring

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12/09/2008

The average rates of interest paid out on savings accounts has rocketed in the past year, despite the Bank Base Rate falling. Analysis by moneysupermarket.com reveals that last September the best easy access account – Northern Rock’s online tracker – paid 6.31%, when the Base Rate was 5.75%. Today the best easy access savings account is from Alliance & Leicester and pays 6.56% – 1.56% higher than the Base Rate.
These generous rates are the result of banks’ desperation to claw in as much cash on deposit as they possible can, following the run on Northern Rock.

Kevin Mountford, head of savings at moneysupermarket.com, said: “It has been a turbulent year and there have been many people nursing losses from the stock market performance, but cash savers really have had the last laugh. While the base rate has been falling, the average rate on savings accounts has been steadily climbing as providers seek to shore up their books. As long as this demand for retail deposits remains high, savings rates will stay high – it’s that simple.
“What has been most interesting is how the best buy tables have changed – 12 months ago, UK banks tended to dominate the top five whereas now we’re seeing foreign banks really flexing their muscles. In particular, we’ve seen strong offerings from the likes of Kaupthing and ICICI, which has led to a rate war. This increased competition means some UK institutions will need to start making bolder moves for our deposits.”

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