Savings rates hit magic 7%
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| Woman with money jar (c) Rex |
Icelandic bank Icesave has a one-year bond paying 7.1% on balances of £1,000. Birmingham Midshires has an internet one-year fixed rate bond paying 6.88% on deposits of just £1, as well as a six-month internet bond paying annual interest of 6.83%. Savers can’t access their money during this time but in return they receive a very competitive rate of interest.
The rates of interest paid on two- and three-year bonds are slightly lower, although savers have the security of a longer-term fixed rate of interest. Icesave’s two-year bond pays annual interest of 6.5% on balances of £1,000. Halifax’s three-year bond has an annual interest rate of 6.35%, on deposits from £500.
But if you think you may need access to your savings – for example, if that rainy day happens – it may be better to opt for an instant access savings account where you are not penalised for withdrawing your cash.
Chelsea building society’s instant access Rainy Day account pays 6.1% on savings of £10 plus. Savers can withdraw up to £1,000 without penalty in the first year. Heritable Bank’s easy access account pays 6.06% but savers need a deposit of at least £1,000.
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Flexible - or fixed?
For those prepared to save online, Abbey, Alliance & Leicester, Birmingham Midshires and Kaupthing Edge are all offering easy access accounts paying 6.5%.
Regular savings accounts are an alternative for those who either don’t have a large sum to put away or who want the commitment of saving on a regular basis. In recent years these accounts have offered headline rates of up to 8%, but the reality can be less attractive.
For example, Abbey has a regular savings account paying 7.25%. Customers can save between £25 and £250 a month but because the money must be invested monthly, rather than all at once, only the first payment made will actually earn the full year’s interest of 7%. The remainder will receive a proportion: for example, the eleventh deposit made will only earn interest for one month.
Halifax has a similar account paying 7% on monthly deposits of between £25 and £250. No withdrawals can be made from either account without customers being hit hard by penalties.
13 May 2008
