Money Insider: Savers should switch to make best of rock-bottom rates

Yet another month passes and there's still no light at the end of the tunnel for savers who continue to suffer at the hands of rock-bottom interest rates and niggling inflation.

With annual inflation (CPI) down just 0.1 per cent to 3.1 per cent in July, a basic rate taxpayer needs to earn 3.875 per cent before tax to sustain the value of their savings.

Despite protestations from MP's and petitions and campaigns from consumer groups, the grim reality is that this situation isn't going to improve anytime soon. It was back in March 2009 that base rate hit 0.5 per cent and, almost 18 months on, there's no sign of it picking up, with many analysts confidently predicting no change until spring 2011 at the earliest.

So what should you do? It depends on your situation, but if you're building a savings pot by putting money aside on a weekly or monthly basis, then unless you've got some expensive credit card or overdraft debt to clear, the message is to carry on saving.

Whilst the icing on the cake – your interest – may be a little thin, at least your capital will continue to grow and when interest rates eventually pick up, you'll be in a better position to benefit. In the meantime, keep a check on interest rates and try to get the best return you can during these testing times.

If you're not in a position to add to your savings and are relying on them to supplement your income, it's still worth checking the rates on offer and switching your money to squeeze the most you can from the banks or building societies. There are hundreds of savings accounts paying less than 0.2 per cent and if your money is sitting in one of these then it's time to take some swift action and move it elsewhere as you can easily earn 10 to 15 times as much.

If you want instant access to your savings, you can get 2.80 per cent with AA savings, 2.75 per cent with Birmingham Midshires and Santander, and 2.70 per cent from Sainsbury's Finance. All of these include an introductory bonus for the first 12 months, so you'll need to switch again this time next year, but at least you're getting a "best buy" rate in the meantime. If you can lock your cash away then it's possible to earn 3.10 per cent for one year with ICICI Bank UK or 3.70 per cent for two years with Coventry Building Society.

There are even higher returns for those who are able to put their money into a five-year bond, however I appreciate that people may be concerned with having to tie their cash up until 2015. However this week we saw the launch of a new stepped rate savings bond from State Bank of India, which is likely to prove very popular due to a combination of good rates and flexibility. It pays 3.25 per cent in year one, 4 per cent in year two, 4.5 per cent in the third year, 5 per cent in the fourth and 5.75 per cent in the final year.

The big plus point with this account is that savers are able to withdraw their money in full after two years, without any penalties or loss of interest. So if the Bank of England rate rises and savings rates improve, savers are free to exit the bond after two, three or four years and switch to a better account elsewhere.

Post Office offers reduced mortgage rates

the post Office reduced rates across its mortgage range last week and launched an attractive 2.85 per cent fix for two years up to 65 per cent LTV.

Whilst the rate is excellent, the large arrangement fee of £1,495 means that, in some cases, it will prove more expensive than competitor products charging a higher rate of interest.

For example on a £150,000 advance, the 2.99 per cent fix (to 75 per cent LTV) from Yorkshire Building Society with a £495 fee works out £739.12 cheaper over the two-year term. This highlights the importance of establishing the total cost of your mortgage and not being swayed by headline interest rates. Arrangement fees can vary dramatically between providers and the shorter the term of your mortgage, the more impact these fees will have.

Away from fixed rates, HSBC this week announced that it was extending the original two-week deal for its 2.19 per cent tracker mortgage with a £99 booking fee. The lifetime tracker, currently the lowest in the market, could be withdrawn at anytime, but will definitely be gone by 5 September.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
The Banksy image in Folkestone before it was vandalised
Life and Style

Sales of the tablet are set to fall again, say analysts

football West Brom vs Man Utd match report: Blind grabs point, but away form a problem for Van Gaal
Arts and Entertainment
Gotham is coming to UK shores this autumn
tvGotham, episode 2, review
Arts and Entertainment
Bloom Time: Mira Sorvino
tvMira Sorvino on leaving movie roles for 'The Intruders'
First woman: Valentina Tereshkova
peopleNASA guinea pig Kate Greene thinks it might fly
Brian Harvey turned up at Downing Street today demanding to speak to the Prime Minister

Met Police confirm there was a 'minor disturbance' and that no-one was arrested

Arts and Entertainment
George Lucas poses with a group of Star Wars-inspired Disney characters at Disney's Hollywood Studios in 2010

George Lucas criticises the major Hollywood film studios

Chris Grayling, Justice Secretary: 'There are pressures which we are facing but there is not a crisis'

Does Chris Grayling realise what a vague concept he is dealing with?

Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

Life and Style
The charity Sands reports that 11 babies are stillborn everyday in the UK
lifeEleven babies are stillborn every day in the UK, yet no one speaks about this silent tragedy
Blackpool is expected to become one of the first places to introduce the Government’s controversial new Public Space Protection Orders (PSPOs)

Parties threaten resort's image as a family destination

Life and Style
Northern soul mecca the Wigan Casino
fashionGone are the punks, casuals, new romantics, ravers, skaters, crusties. Now all kids look the same
Life and Style

I Am Bread could actually be a challenging and nuanced title

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Customer Service Executive / Inbound Customer Service Agent

    £18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...

    ASP.NET Web Developer / .NET Developer

    £60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....

    Operational Risk Manager - Asset Management

    £60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

    Project Coordinator - 12 month contract

    £27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...

    Day In a Page

    Two super-sized ships have cruised into British waters, but how big can these behemoths get?

    Super-sized ships: How big can they get?

    Two of the largest vessels in the world cruised into UK waters last week
    British doctors on brink of 'cure' for paralysis with spinal cord treatment

    British doctors on brink of cure for paralysis

    Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
    Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

    Salisbury ranked seventh in world’s best tourist cities

    The city is home to one of the four surviving copies of the Magna Carta, along with the world’s oldest mechanical clock
    Let's talk about loss

    We need to talk about loss

    Secrecy and silence surround stillbirth
    Will there be an all-female mission to Mars?

    Will there be an all-female mission to Mars?

    Women may be better suited to space travel than men are
    Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

    'They poured water on, then electrified me...'

    If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
    James Wharton: The former Guard now fighting discrimination against gay soldiers

    The former Guard now fighting discrimination against gay soldiers

    Life after the Army has brought new battles for the LGBT activist James Wharton
    Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

    Panic over Ebola threatens to infect the midterms

    Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
    Premier League coaches join the RSC to swap the tricks of their trades

    Darling, you were fabulous! But offside...

    Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
    How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

    How to dress with authority

    Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
    New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

    New book on Ian Curtis sheds fresh light on the life of the late singer

    'Joy Division were making art... Ian was for real' says author Jon Savage
    Sean Harris: A rare interview with British acting's secret weapon

    Sean Harris: A rare interview with British acting's secret weapon

    The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
    Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

    Tim Minchin interview

    For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
    Boris Johnson's boozing won't win the puritan vote

    Boris's boozing won't win the puritan vote

    Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
    Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

    Tim Wheeler: Alzheimer's, memories and my dad

    Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album