Never been a better time to save

Interest rates may be low but analysis from moneysupermarket.com shows there has never been a better time to be a saver. Anyone with some spare cash would be wise to put it away now.

Even though the Bank of England Base Rate has remained unchanged at 0.5 per cent since March, savings rates have been climbing. The average rate of the top five easy access accounts is now 3.11 per cent. This may not sound impressive given the best rates were above 6.0 per cent this time last year, but it's 2.61 per cent above the Base Rate.

Also, with inflation having plummeted over the past 12 months, savers don't have to worry about the value of their returns being eroded by the effects of rising prices. In August 2008 when the Retail Price Index (RPI), one of the country's official measures of inflation, was running at 4.8 per cent, a standard rate taxpayer needed a savings rate of 6.0 per cent just to break even. Inflation is now much less of a problem - RPI is currently minus 1.6 per cent.

Consumers therefore shouldn't be fooled into thinking now isn't a good time to save.

Kevin Mountford, head of banking at moneysupermarket.com, said: "Savers were obviously hit hard when the Bank of England slashed interest rates at the end of last year and beginning of this year. With the Base Rate still at 0.5 per cent and many savings accounts paying even less than that, you might think things remain pretty bleak. But that's really not the case.

"We've got a savings war on our hands at the moment as banks and building societies battle it out for our cash. The margin between the leading easy access accounts and Base Rate is more than 2.50 per cent which is incredible. And if you've got money you can afford to lock away for a year or two you can earn an even higher rate of interest.

"Savers should be taking advantage of these amazing rates - being able to earn more than 3.0 per cent on your money when Base Rate is just 0.5 per cent is an opportunity not to be missed.

"However, you do need to be aware of catches - many of the highest easy access rates include introductory bonuses, usually for 12 months, and some also restrict withdrawals. This doesn't mean you should steer clear of such deals - just make sure you adhere to the terms and conditions and in the case of bonuses, move your money once the introductory offer ends."