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Are you looking for a short term savings fix?

Are you looking for a short term savings fix?

Category: Savings

Updated: 20/07/2010
First Published: 20/07/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
The low interest rate environment has ensured that recent times have not been too kind on savers, but the thought of locking their money away for years on end may be too much for some.

Investors will no doubt be tempted by the higher rates on offer for those prepared to sign up for five year deals, such as the 4.75% available from ICICI Bank UK, but could be put off by the thought of missing out on interest rate rises.

At the moment, the Bank of England's base rate of interest has been tagged at the historical low of 0.5%, where it has been since March 2009.

There is little to indicate when rates will be increased, but any increase, especially in the short term, is likely to be incremental, with a jump to 0.75% or 1.00%.

Such a change is not going to have a massive effect on the interest earned on savings.

It might, therefore, be worth looking at tying your money up in a short term account, riding out the low interest storm while your funds benefit from a competitive rate of interest.

After a year, higher interest rates could mean that the savings accounts available for your matured funds could be far more attractive than they are currently.

While better rates are certainly available with higher terms, it is worth considering that you may not be able to lay your hands on your funds for a concerted period of time, and that interest rates rises could mean that what is a good rate now may not be in three years' time.

Placing your money in a short term savings account could also be worth considering if your money is sitting in an account that pays a poor rate of interest.

Perhaps the bonus period on your ISA has expired or interest rates have eroded what was once a decent variable account?

Whatever your state of affairs, it is always worth reviewing your current situation and the options that are available.

If you're looking for a high rate for a single year, then ICICI Bank UK offers 3.10% on deposits of £1,000 or more, while those looking for a simpler deal might be tempted by Sainsbury's Finance's Easy Saver which pays 2.70% on minimum investments of just £1 and allows withdrawals.

Internet savvy savers may want to protect their interest from the taxman with Nationwide's e-ISA, which pays 2.69% for one year and allows transfers in and withdrawals.

Savers looking for a slightly longer term can get a competitive rate of 3.00% for two years with Barnsley Building Society's fixed rate ISA.

Find the best savings rates for you - Compare savings accounts

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.