Secure A Great Savings Rate Today!

by Rachel Wait on 05 December 2008  |  23 comments
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The base rate has been cut by another 1% leaving savers in despair. Here's where to grab a top-notch fixed-rate savings account before it's too late.

I don't know about you, but I didn't jump up and down for joy when I heard about yesterday's dramatic base rate cut to 2%.

Why? Well, for a start, I'm a saver. And that means every cut in the base rate is like a slap in the face to me!

My biggest concern is that the interest rate on my savings account is variable, and therefore -- like the base rate -- is rapidly approaching 0%. And with speculation that the base rate could fall even further, I'm not the only one to be worried.

So what can you do to protect your savings?

Fixed-rate bonds

Last month, I wrote an article about fixed-rate bonds after the base rate fell to 3%. At the time, I said fixed-rate bonds were an attractive option because they allow you to lock-in your return, for six months, a year, or even longer.

A month on, and I think they are even more attractive.

Of course, since I wrote my last article, the interest rates on many fixed-rate bonds have been slashed. So if you didn't grab a deal back then, you may have missed out on some of the top deals.

That said, there are still some good deals out there. So let's take a look at what's available:

*This drops to 5.51% AER if a withdrawal is made

As you can see from the table, a lot of these rates are still pretty decent. The 6% AER from Abbey is particularly attractive. However, you should be aware that to qualify for the account, you will need to pay in between £20 and £250 a month. If you go above or below this amount, the rate will drop to a miniscule 0.10% AER.

ICICI and Anglo Irish are also offering an impressive rate at 5.75% AER, although you will need to have a fairly substantial minimum payment for these two accounts.

I should stress, however, some of these rates may not be around for much longer. So if you want to grab hold of one, act fast. That said, Bank of Cyprus and Birmingham Midshires have already reduced their rates following Thursday's base rate cut, so their rates should hold steady for a while.

If you are thinking of opening a fixed rate bond account, do remember that you will need to be prepared to leave your funds untouched for the set period.

Safety

While the economy remains volatile, the security of your money remains a big concern. You may want to stick with some of the bigger names on the table like Abbey and Nationwide. Both look pretty solid, although of course nothing can be guaranteed.

However, as long as your bank is protected by the Financial Services Compensation Scheme, your cash will be 100% safe. That's providing you don't save more than £50,000 with banks that hold one banking licence. You can read more about how safe you bank is in this article.

What if I don't want to lock away my funds?

If you are not keen on the idea of a fixed-rate bond, there's always the option of a variable rate account instead. Some accounts still offer decent rates, but the major drawback is that the interest rate can change at any point.

Another alternative is to keep your cash in a current account instead of a savings account. It may sound odd, but as my Foolish friend Neil Faulkner explains in this article, some current accounts are paying extremely attractive interest rates. The Alliance & Leicester Premier Direct Current Account, for example, pays a whopping 8.5% AER.

Pretty impressive huh? I think so.

So what are you waiting for? Get a better savings account today!

More:  Hunt Down The Best Savings Rates | Savings Providers Slash Rates

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