UK Banks Forced to Increase Savings Rates

The latest report published by Moneyfacts on August 4th suggests that savers will be better off from now on as building societies and banks are being forced to increase savings rates. The Treasury Report on UK Savings, published by Monefacts, reveals that at the moment a vast majority of savings accounts, offered by British banks, offer a savings rate which is well above the BOE’s base rate of 0.5%. The major part (55.3%) of 2,265 savings accounts offered to customers by UK banks in June 2009 was paying more than 0.5%. On average, a no-notice account has a savings rate of 0.8%, while an average 1-year fixed account pays 3.04%. Even though the savings rate seem to be quite high for these days, they still are far from those of last summer, when an average 1-year fixed account paid as much as 8%. The Moneyfacts report shows that the best-buy savings deal is now available from the Post Office. It offers a 3.85% savings rate on 1-year Growth Bond on deposits of £500 or more. Another best-buy deal, which can be found online is offered by the Saffron Building Society; it pays as much as 2.8% on deposits of £10 or more. Industry experts say that banks want to persuade savers to deposit their money for as long as possible and their only option is offering high savings rates. Moneyfacts analyst, Darren Cooks, says that the firm’s report proves the above-mentioned fact. He adds that an average long-term savings account now pays 3.51% - a factor that contributes greatly to the rise of mortgage interest rates. Last month, Moneyfacts reported that changes of rates in June resulted in the fall of a shelf-life of remortgage deals from 23 to 14 days. Moreover, the gap is expected to fall further as British banks prefer to withdraw best buy mortgage deals when they reach the top. Currently, an average 2-year fixed mortgage deal is being offered at 4.47%, which compares to 3.98% in June. The Bank of England base rate, which has been at the level of 0.5% for quite a bit, is not expected to be changed by the Monetary Policy Committee on Thursday, when its monthly meeting will be held.

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