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Five minute focus: The savings rate conundrum

Five minute focus: The savings rate conundrum

Category: Savings

Updated: 07/06/2010
First Published: 07/06/2010

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 It is now over 6 months old so the content may be out of date.

No one quite knows when the Bank of England will change bank base rate, but what we do know for certain is the only way from here is up. Many experts are predicting a rise in the first quarter of 2011, while others think we may see a change later this year.

As a rise in interest rates becomes more likely, savers' appetite for locking their money away wanes. Rates on fixed rate bonds continue to drop, providing little incentive to tempt savers' money.

Savings accounts requiring a small amount of notice had enjoyed a resurgence in the last few months, as savers looked for an alternative to longer term commitments. However, in the last few weeks a number of market leading savings deals have been withdrawn and the average rate on notice accounts has fallen to a nine month low.

Figures from Moneyfacts show there has been an increase in the number of people looking for an easy access account. It is a wise decision considering not only will they benefit from interest rate rises as and when they happen, but the market leading rate of 3.00pc is equal to that being paid on one year fixed rate bonds and notice accounts.

A&L increases rates

Alliance & Leicester has increased the rate on its Online Saver Issue 7 for new and existing customers. The account now pays 2.81pc, including a 2.31pc bonus for the first 12 months. Savers can invest up to £2m into the online operated account. No notice is required to make a withdrawal, but all transactions must be made via a nominated current account.

Sainsbury's extends it range

After a three year absence, Sainsbury's Finance is re-entering the fixed rate bond market. Its Fixed Rate Saver requires savers to commit funds for two years and pays a competitive 3.55pc. Savers can invest between £5,000 and £50,000 into the bond, but once opened further additions and earlier access is not permitted.

Egg rewards customers

Egg has teamed up with Quidco to offer cash-back, typically 10pc, on purchases at over 1,500 selected retailers via its new Egg Cash Back Superstore. Customers taking out the Egg Visa Card will also benefit from no interest being charged on new purchases until 1 September 2010 and to protect those new purchases, the card offers purchase protection and internet delivery guarantee as standard. Balance transfers are permitted with no interest being charged until 1 August 2011, subject to a 3.00pc fee. A typical APR of 17.9pc is charged thereafter.

Guaranteed returns from Aldermore

Aldermore has just launched its Guaranteed Return Bond, a structured bond requiring a minimum investment of £1,000 for a five year term. The plan is available in two options: a Fixed Option, which on maturity pays either a guaranteed minimum return of 5% or 35% if the FTSE 100 rises or remains unchanged; or the Growth Option, which pays either a guaranteed minimum return of 5% or 90% of the FTSE 100 index growth. The bond is also available within an ISA wrapper.

Virgin offers best of both worlds

Whether you're looking for a credit card for new purchases or to transfer an existing balance, the new credit card from Virgin Money is likely to appeal. The card charges no interest on new purchases and balance transfers for 12 months. A fee of 2.98pc, minimum £3.00, will apply on all transferred balances. A typical APR of 18.9pc is charged thereafter.

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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.