Savers warned on bonus rates

In the current low rate environment, many savings providers are offering attractive bonus rates on their savings deals with average bonus rates currently 1.93 per cent, compared to 0.71 per cent two years ago. moneysupermarket.com is warning savers to pay close attention to these bonus rates because many are variable and savers could see rates fall earlier than expected.

The reliance on bonus rates to attract new customers has significantly increased with eight products featuring in the top 10 best buy tables compared to just two in 2007.

Kevin Mountford, head of banking at moneysupermarket.com, said: "Savings rates are highly inflated at the moment because banks and building societies are still desperate for our cash. Savers should treat variable bonus rates with caution as rates may quickly drop. If you go for a deal that offers a fixed bonus you at least have some peace of mind.

"Those savers who take out bonus rate savings deals should also take note of when the bonus ends and be prepared to switch accounts once this happens. A really savvy saver can use bonuses to significantly boost their returns as long as they are willing to put in a little effort."

Savers investing £3,000 in a top paying savings account would earn on average £92.85 in interest in year one but this falls dramatically to £33.63 in year two.

Egg's Savings Account is paying one of the leading easy access rates at 3.25 per cent and this includes a two per cent bonus that is fixed for 12 months. ING Direct has increased the rate on its savings account from three per cent to 3.2 per cent and although this does not include a fixed bonus per se, the rate is guaranteed for the first year.

Research by moneysupermarket.com found nearly half of all savers (46 per cent) have never changed their saving account and nearly a third (31 per cent) have never checked their savings rate; so it is clear banks are benefiting significantly from customer inertia.