Savers should beware as rates fall

Interest rates are coming down on many savings accounts following the Bank of England cut on Thursday.  But although the base rate fell by just a quarter of a percentage point, the rates on some savings accounts have come down by far more.  Newcomer Kaupthing Edge, however, has thrown down the gauntlet by declaring that it will not cut the 6.5% rate on its table-topping easy-access account. ICICI, which pays 6.41% to HiSave customers, Bradford & Bingley (6.40%) and Icesave (6.40%) have yet to reveal whether they have the stomach for a fight.  Watch this space!

Newcomer Kaupthing offers 6.5% to online savers

Icelandic-owned Kaupthing Edge, an online savings provider, has become the latest foreign bank to launch an account aimed at British savers.  The instant-access savings account which pays 6.5% gross rivals that of ICICI Bank’s HiSave account at 6.41% (which has stayed at the top for a long while).  Savers must first open the instant-access account with a minimum of £1,000 before they can take advantage of Kaupthing’s fixed rates while ICICI HiSave only requires £1.  It also offers a six-month fixed-rate bond at 6.8% gross and a 12-month fixed-rate bond at 6.86% gross.  Kaupthing is regulated by the Financial Services Authority and as such savers’ cash up to £35,000 is protected under the Financial Services Compensation Scheme if the bank were to run into difficulties.  Kaupthing also guarantees that the rate on its instant-access account, which is variable, will not be less than 0.3 of a percentage point above the base rate until February 2012.

Don’t be fooled by the headline grabbing rates

When deciding on which savings account to go for, beware of the tricks used by some of the internet savers on offer.  You will find tantalisingly high interest rates, however a single withdrawal could result in a lower rate or even none at all for that month.  This is why ICICI’s HiSAVE account with 6.41% got the “two thumbs” up from me; no catch, no hassle.  Rates are guaranteed to be 0.30% above Bank of England base rate untill 31st of December 2011 (from the 1st of January 2008).  Alternatively, if you’re looking for a known brand, go for Sainbury’s Internet Saver currently at 6.25%.

ICICI comes out top for savers

ICICI’s HiSAVE Account has beaten well known high street savings accounts with a rate of 6.41% before tax and you still have instant access to all your money.  It is FSA regulated and is even more appealing now that they have recently joined the Banking code.