Money: First the good news

Rates lift for savers

Interest rates are on the up, clearly bad news for mortgage borrowers. But for millions of small savers, who have seen returns on their deposits decline in the past two years, there is at least one small silver lining.

In the past few weeks, banks and building societies have been steadily adjusting their accounts upwards.

Christine Bayliss, investment editor at MoneyFacts, the financial information provider, says: "Rates are definitely moving upwards, on average between 0.2 and 0.5 per cent. What we have found is two main areas of competition. The first is over instant access postal accounts, with several new accounts opening.

"The second is in the market for short-term fixed rates. These have been very popular, with several closing early after taking all the money they need to."

Among those to have withdrawn their products are Nationwide, Derbyshire and Newcastle building societies.

Rises detailed by MoneyFacts in the past month include Alliance & Leicester which shifted its Instant Direct account from 5.9 to 6.06 per cent on deposits over pounds 10,000. Bristol & West raised its Postal Direct account from 6 to 6.4 per cent for the same deposit.

New postal accounts being launched include Melton Mowbray, offering 5.75 per cent on accounts of pounds 10,000, Northern Rock's Select Instant paying 6.35 per cent for the same amount and Stroud & Swindon, offering 5.75 per cent.

Short-term rates in high demand include a new Bristol & West offering at 6.75 per cent to May 1 1998; Cheshire, which promises 7 per cent on deposits over pounds 25,000 and Prudential Banking offering 7.05 per cent over 16 months on deposits above pounds 10,000.

Norwich and Peterborough is still offering 6.75 per cent on deposits of pounds 5,000, pegged for one year.