Best-buy Rates Improve as 'Savings War' Continues

The "savings war" is in full swing, with providers offering ever-more-generous rates for their instant-access accounts.

According to new research from cahoot, the average best-buy account now offers a rate of 6.51 percent, comparing very favourably with the Bank of England's five percent base rate. This figure becomes all the more impressive when compared with last summer - when best-buys stood at 6.27 percent compared with a base rate of 5.75 percent.

The ongoing credit crunch is a major factor behind these generous offers. Banks who have been hit by dropping mortgage incomes and multi-billion asset writedowns reacting to the financial crisis are looking to boost their revenues, and gaining extra savings deposits represents a good way of doing this.

Accordingly, a "savings war" has been declared, with firms attempting to outdo each other with ever-higher best-buy rates. Top paying accounts have even topped seven percent in some instances - more than two percent above the base rate.

Savers' choice has also drastically improved over the past 12 months, cahoot said. Last year, just 490 accounts were on offer in the UK, while currently there are 1,503 on the market.

Matthew Timms, managing director, cahoot commented: "Few of us will be celebrating the anniversary of the credit crunch but it's clear that savers have been the winners with rates hitting the seven percent mark in recent months."