'Credit crunch' has silver lining for some savers

With the Bank of England keeping rates on hold this week, banks and building societies constrained by the "credit crunch" and the de facto rise in market interest rates seem to be looking to savers to help them fund their activities.

More and more institutions are offering very competitive rates, with returns on some one-year savings bonds at nearly 7 per cent.

For those with a few pounds to put away, the credit crunch seems to have brought a silver lining.

Andrew Haggar, from the financial services website Moneyfacts, reports a "surge" in interest rates for fixed-term savings accounts, in an attempt by banks to "bring funds in via their front doors".

He adds: "With rates being increased by up to 0.55 per cent in some cases, it is an excellent opportunity for savers to bag themselves a great fixed-rate savings deal, as institutions battle to bring in additional funds to help them during these difficult times."

Northern Rock, which normally raises much of its funding from wholesale markets, is a notable member of the new wave of generous retail players.

Despite repeated "injections of liquidity" by the Bank of England, the American Federal Reserve and the European Central Bank, money markets all over the world are still in a state of crisis, with banks unwilling or unable to lend to each other.

With wholesale money so expensive, hence the appeal to the nation's piggy banks to step in.

Savings rates compared

* ANGLO-IRISH BANK:

1-year fixed-rate bond. New rate: 6.90%. Old: 6.70%

* WEST BROMWICH BS:

1-year E Bond 11. New rate: 6.86%. New product

* DERBYSHIRE: 1-year fixed-rate bond 152. New rate: 6.85%. Old: 6.30%

* NORTHERN ROCK:

1-year fixed-rate bond 292. New rate: 6.71%. Old rate: 6.40%

* HERITABLE: 2-year fixed-rate bond 20. New rate: 6.70%. Old: 6.36%

* LAIKI BANK: 1-year fixed-term deposit. New rate: 6.65%. Old: 6.35%

* BRADFORD & BINGLEY:

1-year fixed-term bond 166 & eBond 16. New rate: 6.50%. Old: 6.30%

Moneyfacts.co.uk