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Providers do battle for short term savings

Providers do battle for short term savings

Category: Savings

Updated: 02/12/2010
First Published: 01/12/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Top rates of interest are increasingly on offer in the short term market as providers battle for maturing monies, Moneyfacts.co.uk research has found.

In November last year, National Savings & Investments – the Government backed provider – topped Best Buy tables, with savers rushing to take advantage of top rates and 100% protection on their money.

During this time, rates reached a peak of 3.23% and now the battle is on to attract the maturing monies from these accounts.

In the last three months, the number of one year bonds paying 3.00% or above has increased from three to 17.

In addition, providers have changed tact in recent times, relying more heavily on in house sources of funding, such as savings balances.

Of the top savings accounts vying for the attention of savers with newly matured funds, the one year bond from Northern Rock tops the short term market, offering a headline rate of 3.15%.

The account can be opened with deposits of only £1 and further additions can be made.

The Post Office is also in the running for customers looking to lock their money away for another year in return for a great rate.

Its one year bond offers a rate of 3.00% on deposits of £500 or more.

"Competition was rife in the one year bond market in November 2009 and now providers are upping their rates in order to take advantage of the large volumes of maturing monies that are re-entering the market," commented Michelle Slade, spokesperson for Moneyfacts.co.uk

"Savings providers are prepared to pay a premium in order to attract new money."

However, savers have been warned that such generous rates of interest may not be around for too long.

"Going forward, the wide margin between base rate and savings rates may become unsustainable for providers," said Slade.

"Once base rate does start to increase, providers may opt to only pass on part of the increase to savers in attempts to reduce this margin.

"In the current low rate environment, the most competitive bond rates tend to only last for short periods.

"Savers should act fast or they may lose out."

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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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