You may have recently opened a savings account with one of the banks or building societies offering a best buy interest rate, but don't rest on your laurels and assume that the rate you get will always be one of the best.
The decision by the one-time kings of the savings market, ING direct, to not pass on the 0.25% base rate hike to their loyal customers for the second time in two months is a stark reminder of how things can change.
In the summer of 2003, just a couple of months after launch, ING was paying 4.30%, which at the time was 0.80% above the Bank of England base rate of 3.50%. Now they are paying 4.75% AER, which is currently 0.50% below base rate – a downward swing against base rate of 1.30%.
Many consumers don't keep an eye on the savings rate their bank or building society pays them. To an extent, institutions will rely on this apathy, hoping that people will be oblivious to the situation and will continue to leave their hard earned credit balances in an account paying an uncompetitive rate of return.
ING certainly hasn't had it all its own way during the last six months, especially with the likes of Birmingham Midshires direct tracker account launched last July and IceSave launched in October currently offering best buy interest rates of 5.50% AER and 5.70% AER respectively.
This week we have seen new savings products launched by a couple of the banking heavyweights which are perhaps anticipating an exodus of customers from ING Direct and are offering what on the face of it appear to be a tempting deal for those seeking a new home for their 'nest egg'.
Bank of Scotland has launched IASA Reward paying 5.75% AER fixed for 12 months with a minimum balance of £5,000. However although it is described as an 'instant savings' account, you are only allowed one withdrawal during the one year term, and if you exceed this, then the account reverts to a variable interest rate account.
Similarly HSBC has launched a limited offer with its online saver account paying 5.75% AER from balances of £1, but beware that if you make a withdrawal, you forfeit interest on your entire balance for that calendar month.
So in summary, if you are still one of those remaining loyal to ING, it's definitely time to shop around, but watch out for offers that have some hidden terms and conditions. To check out what's currently hot and what's not in the savings market, log on to Moneyfacts.co.uk and look at the best buy tables.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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