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Five minute finance: Finding a competitive rate

Five minute finance: Finding a competitive rate

Category: Savings

Updated: 02/08/2010
First Published: 02/08/2010

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 It is now over 6 months old so the content may be out of date.

It will come as no great surprise to anyone that finding a competitive home for your money in the current environment is tough.

More than half of variable rate savings accounts on the market pay just 0.50% or less. While only 3.6% of accounts pay a rate within 0.50% of the market leader.

Although many of the high street providers have improved their competitive positioning in the market, in many instances they are still a way off the pace, accounting for just 16% of the savings best buys. Savers need to look at smaller, maybe less well known providers if they want to achieve the highest possible return.

The smaller building societies account for half of the best buy places and offer the majority of the market leading variable rate deals. Savers looking for fixed rates are being offered market leading rates of interest from smaller, less well known banks, many of which have their parent company based overseas. Savers remain concerned about investing in perceived "foreign banks" following the Icesave debacle.

However, the majority of these banks are fully registered with the FSA and therefore offer the same level of protection as all UK based banks or are covered under the scheme in their country of origin, which typically offers a higher level of protection than offered by the UK Financial Services Compensation Scheme.

Coventry storms to the top

Coventry Building Society has unveiled its new Bank of England Base Rate tracker bond. This account is guaranteed to pay at least 3.20% a year until 30th September 2012 tracking at 2.20% above base rate. The rate will start to track once base rate rises above 1%. Investments range from just £1 up to £250,000. Early access is allowed, subject to 90 days' loss of interest.

Santander steps up

Following an increase in the bonus, the Santander eSaver account now pays 2.75%, including a 2.25% bonus for 12 months. Savers can invest up to £2m into the online operated account, which comes with a cash card allowing savers instant access to their money when required.

Best buy bonds

Barnsley Building Society has launched a range of fixed rate products to tempt savers. Its new One Year Bonds pay 3.00%, while its four year bond pays a market leading 4.25%. Between £100 and £1 million (£2 million for four year bond) can be invested in the bonds, with further additions permitted whilst the issue remains open. Earlier access is not permitted. The society has also launched a one year fixed rate ISA paying a market leading 3.00%.

Time to take notice

The latest issue of the Premier Notice account from Manchester Building Society is offering new customers a competitive rate of 2.81%. Savers can invest between £1,000 and £50,000 into the account, but further additions can only be made until 10th September 2010. No more than four withdrawals per annum are permitted and savers must give 35 days' notice. Only three variable rate accounts currently pay a slightly higher rate, but all require savers to give at least 90 days' notice.

Supermarket leads the way

Tesco Bank has increased the length of its interest free period on new purchases to a market leading 13 months. The move puts the Clubcard MasterCard just ahead of its rival Sainsbury's Finance, which increased its deal earlier this year. Customers with an existing debt on a card are now being offered 0% for nine months on balance transfers, subject to a fee of 2.90%. Card holders can also collect additional Clubcard points at a rate of 1 point per £4 spent on the card. Additional points are available on Tesco spend.

Find more of 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.