Thirty-day account is first past the post: Northern Rock's new offering will be a trendsetter, says Neasa MacErlean

TOMORROW morning Northern Rock Building Society will launch a 30-day-notice postal account. Like many new postal account launches before it, Postal 30 will at once go to the head of the best rates table.

It will be the first 30-day postal account in the UK and, if as is likely all goes well, could soon be followed by many more.

Northern Rock has closed its instant-access postal account, Go Direct, to new applicants - although it will still welcome new deposits to existing accounts - in order to concentrate on Postal 30.

The building society says that having gained experience with instant-access accounts, it now wants to experiment with something new.

The notice period on Postal 30 also enables it to pay a higher rate of interest at a time when investors are chasing high returns.

The innovations that building societies are prepared to make to attract investors confirms the speed with which the relatively young postal account market is maturing.

Northern Rock will be offering rates which are substantially higher than all the instant-access accounts and nearly all the over-the-counter 30-day accounts.

The only exception is the Chelsea Premier VII 30-day account, which offers a top rate of 9.25 per cent on investments of pounds 10,000, but makes a charge of 45 days loss of interest on any withdrawals.

Postal 30's rates are comparable with most societies' traditional over the counter 60-day and 90-day accounts. It offers 7.3 per cent gross on deposits of pounds 2,500 (the minimum investment), 7.55 per cent on pounds 10,000, 7.8 per cent on pounds 25,000 and 8.05 per cent on pounds 50,000.

Current players in the postal market may find it hard to raise existing interest rates to cope with the expected surge of new accounts. To gain new business, they may therefore prefer to launch a completely new product - such as a 30-day postal account.

The message for postal account holders is to keep a close eye on the rates different societies are offering.

The Cheltenham & Gloucester was the first society to launch a postal account, four years ago, and a spokesman admitted that its London Share Account, which has a uniform rate of 6.25 per cent, is 'not as competitive as it used to be'. Its London Deposit Account, however, offers a more competitive top rate of 7.2 per cent on pounds 25,000.

Within a week of announcing the launch of Postal 30, Northern Rock had received 5,000 inquiries. Another institution which is apparently reaping the benefits of its ingenuity is the Yorkshire Building Society, which targeted the retired and the elderly with its First Class Return postal account.

Savers are given a 10 per cent increase on their interest payments at the end of the year if they do not make any withdrawals of capital.

Without the 10 per cent bonus, an investment of pounds 10,000 would get a return of 6.9 per cent. With the bonus the return would be 7.6 per cent.

Even the Abbey National, which has a huge branch network of 700 outlets, is now piloting an instant-access postal account.

Savers know that the best rates available are to be found on postal accounts, where the administration costs are lowest.

----------------------------------------------------------------- BUILDING SOCIETY POSTAL ACCOUNTS ----------------------------------------------------------------- All rates are gross of tax deductions Society Account pounds min % rate pounds 25000 B'ham Midshires First Class 10,000 7.00 7.00* Bradf & Bing Direct Prem 1,000 5.90 6.75 Britannia Capital Trust 2,000 6.80 7.25 Bristol & West Balmoral 2,000 6.50 7.00* Chelsea Classic 2,500 6.10 7.10 Chelt & Glouc London Share 2,500 6.25 6.25 Deposit 10,000 6.70 7.20 North of Eng Edinburgh 2,500 6.50 7.50 Norw & P'boro Postmaster 1,000 6.00 6.75* Northern Rock Postal 30 2,500 7.30 7.80* Scarborough First Post 250 5.75 5.75 Plus 10,000 6.50 6.75* ----------------------------------------------------------------- * Higher rates available for larger sums -----------------------------------------------------------------

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