By Kate Hughes
Consumers are enjoying a bumper crop of savings interest rates thanks to fierce competition for deposits, despite this month's quarter-point cut in the Bank of England base rate.
The battle for customers' money, particularly through "best buy" recognition, means savings rates are as much as 1 per cent higher than they were in February 2006, the last time the base rate was 5.25 per cent, according to the price comparison site Moneyfacts.co.uk.
"Some institutions are favouring a strategy of bringing in more funds via retail deposits rather than relying so much on funding their lending through the money markets," said Rachel Thrussell, the head of savings for the site. "Even if you take into account that some of these institutions have not yet announced their rate decisions post-base rate, a drop of 0.25 per cent will still leave them well in excess of those on offer last February.
"With uncertainty surrounding stock market investments and many commentators predicting further rate cuts during 2008, there are likely to be many savers ready to take advantage of these opportunities," she added.
In February last year, the best buy instant access account rate was 5.55 per cent from Anglo Irish Bank, followed closely by Birmingham Midshires at 5.5 per cent. This week, West Brom-wich Building Society is offering customers 6.55 per cent, with the Anglo Irish Bank's 6.30 per cent offer coming in second.
Fixed-rate bonds are also available at a higher interest rate. A year ago, the Birmingham Midshires 1-year bond was the best deal at 6.05 per cent, but Anglo Irish Bank now offers a 1-year bond at 6.75 per cent, Moneyfacts has found.
Upward pressure is also being added to rates by overseas banks cashing in on the domestic UK market. Icelandic newcomer Kaupthing Edge has laun-ched an instant access savings account at 6.5 per cent, matched by Nigeria's FBN Bank. ICICI bank, domiciled in India, offers UK savers another instant access deal at 6.41 per cent.