THE recent rise in the base rate should have been good news for savers, but banks have been slow to increase savings rates or don’t plan to raise them at all.
To avoid being undercut, try putting your money in a savings account that tracks the base rate for a guaranteed (if limited) term. Sue Hannums, savings manager at AWD Chase de Vere, an independent financial adviser, says: “Savings rates used to invariably follow the base rate. But lately it has all gone haywire and we have seen banks and building societies cutting rates, seemingly at random, over recent months.”
Chelsea Building Society’s Double Guarantee tracker pays the most attractive rate: half a percentage point above base rate until next May. From then until May 2, 2008, it drops the rate to “at least equal to base rate”. There is a catch, however: withdrawals require 80 days’ notice until 2007 and 40 days after that.
For instant-access trackers, you could consider Yorkshire Building Society’s Internet Saver, which pays 5.1 per cent now and is guaranteed to be at least equal to the base rate until February 28 next year.
Anglo Irish Bank also offers 5.1 per cent (guaranteeing “at least” base rate) until January 2008 — good news for those who dislike the hassle of changing bank accounts. But for the extra year’s security you have to give seven days’ notice before accessing funds.
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The longest guarantee is from Capital One. The “base- rate beater” pays 4.8 per cent and says that it will beat base rate until July 1, 2010.
But savers should not ignore good rates, such as Yorkshire’s, because the term seems short, as providers are unlikely to make severe cuts to rates when it ends. “Banks and building societies tend to review guarantees on expiry, which usually means extending them,” Ms Hannums says. “Rates such as those from Yorkshire or Anglo Irish are unlikely to plummet.”
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