Savers can stay in the black, but it's getting hard

The careful savers who heeded the recession warnings will be hit hardest by yesterday's dramatic base rate cut, but banks and building societies may wait until we are focused on Christmas to slash savings rates even further.

While the knee-jerk reactions to the 150 basis point cut last month resulted in sudden drops in savings rates, this time the move was expected. Many banks have already made significant cuts but further reductions are expected and experts warn that underhand tactics will come into play.

The consensus is that the era of the 7 per cent interest rate is over, at least for the foreseeable future, and 2009 is likely to usher in top rates of 5 to 5.5 per cent.

Currently, the best interest rates on instant access accounts include Manchester Building Society's Premier Guarantee account, offering 5.51 per cent gross on deposits over £1,000, or 5.5 per cent from ICICI Bank's HiSAVE account for just £1.

For those willing to tie up their cash, even for a few months, cash savings are still performing more consistently than equities.

ISAs come into their own at times like this, and savers are being warned not to delay using their allowance as rates are expected to drop further by April.