moneysupermarket.com: Savings market ahead of July MPC meeting

Commenting on the savings market ahead of the July MPC meeting, Kevin Mountford, head of savings at price comparison website moneysupermarket.com, said: “Savers continue to reap the rewards of a rising interest rate environment.

“There are two issues at work in the savings market at the moment that have led to providers raising rates. Firstly, easy access accounts are strongly aligned to the base rate and some providers have increased rates in anticipation of an imminent rate rise. Indeed Bradford & Bingley and Sainsbury’s have both recently increased their offerings. And while the Bradford & Bingley deal is not market leading, with rates greater than six per cent, it is not to be sniffed at. And the story for silver surfers is set to get better too as Coventry Building Society has increased the rates on their 60 Plus e-Saver to 6.4 per cent.

“Secondly, fixed rate savings accounts are linked to the swap rates. One year swap rates are currently circa 6.25 per cent – the highest this century – and reflect the market’s belief that interest rates will rise again in the near future. The strong swap rates have led to some excellent products emerging such as the market leading deals from Bank of Cyprus at 6.53 per cent and Halifax at 6.5 per cent.

“However, we must consider what will happen following the next rate increase. If the swap rates fall then fixed rates will also drop. Anyone wanting to secure an account offering these fantastic returns is urged to move fast.

“As a final word or warning anyone with a fixed rate savings account should beware the account they are shunted onto at the end of the term of their deal. These accounts often offer very poor rates.”