Societies hold back on the bad news for savers: Vivien Goldsmith and Maria Scott discover what this week's base rate cut will mean for borrowers and for those with money to invest

WITH the base rate at 6 per cent, savers will soon be struggling to obtain a return on their deposits of more than 5 per cent after tax.

The main building societies have yet to announce how much they intend to cut savings rates after this week's base rate cut. Nationwide, the second largest society, has promised not to cut returns to savers until the beginning of March, when the mortgage rate changes for existing borowers.

Building societies are nervous about cutting rates because there are already signs that savers are defecting in search of higher returns.

Lloyds and Midland banks have cut their main savings rates by 1 point, and National Westminster trimmed its by roughly 0.6 points. David Powell, director of personal financial services, pointed out that some rates were still above base rate. For instance, its Tessa pays 6.27 per cent, and pounds 50,000 or more on three months' notice earns the same, with monthly income paying 6.04 per cent.

'The building societies are holding off, but we have to change our rates now,' Mr Powell said. The bank's lending rates have also come down. Credit Zone drops from 18.625 to 18 per cent and personal loans come down a full percentage point to 20.9 per cent for under pounds 2,000 and 18.9 per cent for larger loans.

National Savings rates look attractive but there is no certainty about how long they will be on offer. The 40th Issue of National Savings Certificates is paying 5.75 per cent tax-free over five years, worth 7.6 per cent to a basic rate taxpayer and 9.5 per cent to a higher rate taxpayer.

The 6th Index-Linked Savings Certificates are paying 3.25 per cent tax-free on top of inflation over five years. The Children's Bonus Bond is paying 7.85 per cent tax-free over five years.

Cash unit trusts have already started to respond to the base rate cut as their rates fluctuate in line with wholesale money market rates. Fidelity's cash trust is paying 5.1 per cent net (6.8 per cent gross) on pounds 1,000 upwards.

The Bristol-based investment adviser Whitechurch Securities is offering a special deal on a bond run by the insurance company Providence Capitol. The bond invests with the top 10 building societies and currently pays 5.65 per cent net.

Whitechurch will add its 1 per cent commission to investors' returns after a year. The minimum investment is pounds 10,000 and no notice is required for withdrawals.

Principality Building Society is offering a two-year bond paying from 5.85 per cent net (7.8 per cent gross) on sums between pounds 10,000 and pounds 19,999 and 6.6 per cent net (8.8 per cent gross) on pounds 50,000 and over. A balance of at least pounds 10,000 must be maintained in the bond. One emergency withdrawal of up to pounds 2,500 is allowed.

Britannia Building Society is launching a fixed-rate Tessa account on 1 February, paying 8 per cent gross.

Leeds Permanent Building society is offering a 10-year floating rate note traded on the Eurobond market. The interest rate will always be between 7 and 11 per cent, and is fixed twice a year.

As rates are 6 per cent, it will be paying the minimum 7 per cent when the first fix is made on 18 February. Current buying price is pounds 100.121 2 for every pounds 100 of stock.