Despite the quarter-percent cut in base rate to 5.5% last week, there are still plenty of fixed-rate savings accounts offering up to 7%. I suggest you grab them fast.
If you thought the Bank of England’s base rate was meant to be a guide to the ‘going rate’ in the money markets, you’re right- that’s what the textbooks say. But right now, thanks to the ‘credit crunch’, the actual rates at which banks lending to each other in the City are almost 1% higher than base rate. And it’s these ‘interbank’ rates that banks use in deciding how much they can afford to pay savers.
So banks and building societies are trying to replace money they used to get from the wholesale money markets with cash from you and me. And they’re particularly keen on securing the money for up to a year, which is why there’s been a sudden rush of new short-term fixed-rate bonds, mostly with a term of between 6 and 12 months.
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Among the best recent short-term offers are:
| Bradford & Bingley BS | £1,000 | 12 months | 6.8% |
| National Counties BS | £1,000 | 6 months | 7% |
| Stroud & Swindon BS | £500 | 6 months | 6.97% |
| Skipton BS | £500 | 12 months | 6.75% |
| Northern Rock | £1 | 12 months | 6.71% |
| Anglo Irish Bank | £500 | 12 months | 6.75% |
Analysts believe the money markets are likely to start to settle down in the New Year, and if banks find it easier to raise money in the markets, they will quickly withdraw their current offers. So if you do have some cash to tuck away for 6-12 months, I suggest you grab one of these deals while they’re still around.
Compare fixed rate accounts with our best buys
Longer may be better
If you can afford to lock your cash away for a bit longer, then it may be worth accepting a slightly lower rate for a longer period. If the credit crunch eases and base rate is cut again, then rates available for these longer terms may also start to decline.
Among the better longer-term deals available now are:
| Heritable Bank | £1,000 | 6.35% two or three years |
| Halifax | £500 | 6.45%/two years, 6.40%/three years, 6.30%/four years |
| Chelsea BS | £1 | 6.65%, 20 months |
| Northern Rock | £1 | 6.40%, three years |
Fixed rate ISAs
If you have cash in a variable rate cash ISA, now might be a good time to switch it to a fixed rate. Halifax is offering 6.5% on a minimum of £3,000, fixed for four years. Yorkshire BS pays 6.35% fixed for a year on over £100.
