Savings rates hit seven-year high

by Gill Montia

Story link: Savings rates hit seven-year high

Cahoot is convinced that savers have been beneficiaries of the credit crisis, which celebrates its first unofficial anniversary this week.

The Internet bank, which forms part of the Abbey group, has found that rates offered on savings accounts have risen by an average of 0.6% since the onset of the crisis.

The average instant access account is currently offering a return of 3.32% on balances of £500, compared with 2.72% this time last year, while the rate on a best-buy bond has increased from 6.63% to 7.11%.

In addition, savers now have a far wider choice with 1,503 accounts available today, compared with just 490 last summer.

The credit crisis left banks and other financial institutions struggling to fund their lending, as money market sources dried up.

Attracting savers became increasingly important and according to Cahoot, competition for retail deposits has resulted in the highest interest rates for over seven years, with some of the best deals in the fixed-rate savings market.