Bag those best-buy deals now as banks look set to ditch good savings offers

Published on Friday 5 December 2008 19:52

SAVERS with money to lock away have been urged to snap up the best deals before they disappear.

A raft of fixed-rate bonds paying over 5 per cent are still available despite consecutive cuts in the Bank of England base rate that have reduced it to 2 per cent.

But these are likely to be withdrawn in the coming days, predicted Andrew Hagger, head of communications at Moneynet.

"If you have money to lock away for six months or a year, do it now. You can get over 5 per cent now, but you won't be able to do so in a couple of weeks time."

After October's 150 percentage points interest rate cut to 3 per cent, many fixed-rate bonds and best-buy savings accounts stayed at a healthy margin above the base rate. But the non-competitive deals were hit more severely, Hagger pointed out.

"The rates on some savings accounts are getting so low that they almost aren't worth it. If you have lots of savings that you rely on for a monthly income you should switch if you can because you could be getting next to nothing on your interest."

Hagger cited Nationwide's Cashbuilder account as an example, currently paying just 0.3 per cent for savers with 50,000 in their account.

The desire to keep offering one or two best-buy savings deals is one reason why some banks are reluctant to drop their mortgage rates in line with the base rate.

Sir Howard Davies, the former deputy governor of the Bank of England, said yesterday that the government should stop trying to dictate terms to the banks.

"The banks have got to raise money both from depositors and indeed from the inter-bank market," Davies.

Halifax and Nationwide are among lenders to have cut their SVRs by less than the base rate.

"There is the urgent ongoing requirement for many lenders to further build their retail savings base," said Ben Thompson, mortgages director at Legal & General. "Some lenders will reduce their SVR's by the full amount, but unfortunately, the challenge of building their savings base may limit the extent to which lenders will directly pass on the rate cut to all borrowers. Lenders need savers to function properly and they won't attract savers with paltry rates."

• The top three fixed-rate bonds as they stand at the time of going to press are:

Principality Building Society – 5.76 per cent gross for six months (minimum deposit of 1,000).

Anglo Irish Bank – 5.75 per cent gross for one year (minimum deposit of 500).

ICICI Bank UK – 5.75 per cent gross for one year (minimum deposit of 1,000).