Best interest rate on savings accounts
So where DO we go for the best interest rate on savings accounts just now? The decision by the Bank of England to hold interest rates unchanged at 5% this week comes as no great surprise, but it won’t gladden the hearts of those (particularly older people) who have low or no mortgages but a lot of their money held on deposit. They are looking for a return on that money, but the best interest rates on savings aren’t nearly as compelling as they were – and with inflation on the rise, effectively eroding those savings, it’s hardly an incentive to save rather than spend.
The oddity of this oddest of years, of course, is that the Bank of England Base Rate is increasingly at odds with other interest rates in the market: this because of the credit crunch, the resultant reluctance of banks to lend money to each other. This in turn means they have less to lend to us in the form of mortgages and loans, so the price of those goes up – that’s why interest on your variable rate mortgage hasn’t followed the base rate downwards.
But this should be good news when it comes to the best interest rates on savings accounts right? Especially as the banks try to encourage us to save money (therefore giving them more of the scarce stuff to play with). Well up to a point. You will find some very good savings accounts just now, check the best interest rate on savings accounts for more, including a very good 6.5% instant access deal from the Birmingham Midshires Building Society. But be very wary – banks are notorious for enticing us in with a good savings rate, the ‘headline rate’ and then quietly shelving it later on. Let’s not sulk about this, banks are businesses which don’t make anything – they have no function other than to turn small sums of money into bigger sums of money. What YOU must do is keep an eye on your account, and switch when the rate is cut. And if you’re going to leave your money on deposit for a while, go for a cash ISA – for higher rate taxpayers at least they have significant advantages. See How Do ISAs Work for more.
