Savings rates have been improved due to credit crunch-hit banks looking to improve their balance sheets.
Average savings accounts rates are on the up, analysis from financial ratings firm Defaqto shows.
The new study compared today's savings products with those on the market in February 2005, when the Bank of England's base rate of interest also stood at its current level of five per cent. It found across-the-board rate rises: gross AER for easy access savers were up from 3.5 to 3.81 per cent, regular savers increased by 5.48 to 5.55 per cent, while the average tax-free cash ISA also increased from 4.92 to 5.21 per cent.
These advantageous savings rates are due, in part, to the ongoing credit crunch. One of the key features of the global financial crisis is the increasing difficulty firms are having with raising revenue on the money markets, due to high inter-bank lending costs. Therefore, many banks and building societies have turned to customer savings deposits as an alternative source of income, and are racing each other to the top of the best-buy charts as a result.
However, Defaqto warned that rising inflation, which erodes the value of cash, is likely to affect the value of money held in savings accounts over months to come.
The firm's David Black commented: "Savers have emerged as the clear winner of the credit crunch with providers ever so eager to attract retail funds. There are some exceptional deals available as many of the banks and building societies jostle with each other to secure mentions in best buy tables."
