Instant access plan opens door to loan-backs

INVESTORS can now put pounds 10,000 and more on deposit for periods from one to five years at a fixed rate of return (at present around 6.75- 7 per cent gross for one-year deposits, 7.25 per cent for three years fixed, and 7.5 per cent for five-year money), draw out 20 per cent at any time without penalty, and borrow back a further 70 per cent, if necessary, at 1 per cent over base rate (ie currently at 7.75 per cent).

The new high-interest instant access account with added loan-back is being introduced by Cater Allen Retail Banking, a subsidiary of the discount house which now owns Tyndall Bank International, which in turn pioneered the high-interest instant access account in 1991. It is the first formal loan-back arrangement to be offered.

Cater Allen relends deposits only on the wholesale money market or invests in such money market instruments as gilts, certificates of deposit, Treasury bills, and swaps.

Paul Turtle, Cater's director of retail banking, claims to have outperformed high-interest accounts offered by the clearing banks by around 0.4 per cent this year.

But CARB participates in the Deposit Protection Scheme, which guarantees 90 per cent of deposits up to pounds 20,000.

The minimum transaction is pounds 250, but interest may be drawn annually or monthly. The standard rate of tax is deducted at source, but non-taxpayers may receive interest gross, and for expatriates, identical rates are available on tax-free accounts in Jersey and the Isle of Man.

o Tel 0171-623 2070 for latest rates, which can change at short notice.