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UK Money
A recent survey has suggested that despite
all the problems in the global financial
market there are more savings accounts
offering interest rates that match or exceed
the base rate than in many previous years.
This means that there are actually more good
deals available than before.
The figures suggest that around 30% of
standard bank accounts – most commonly ‘easy
access’ accounts – offer a rate of 5% or
more (the BoE’s base rate continues to creep
towards 5%), this is in comparison to only
8% of accounts that offered equal to or
above the base rate only two years ago.
The question that immediately springs to
mind is ‘why’? With so many banks having
problems with credit, why are they so
willing to offer high interest accounts. The
answer can be found, to a certain extent, in
the latest developments in the American
financial market, the change of status of
Goldman Sachs and Morgan Stanley. They have
chosen to change their status to bank
holding companies in order to take deposits
from consumers – this means that they have
access to more money than previously, and
thus can be more secure.
By offering high interest accounts with
attractive rates, the banks are hoping that
they will be able to entice new customers,
this will mean that they have more money at
their disposal. This, of course, is vital
with the borrowing rate between banks being
so expensive and the effective freeze on
credit exchange.
There is, however, several caveats on the
findings of this study. The researchers were
looking at sums of money that are not
altogether insignificant. The accounts were
for deposits of £5,000 or greater, and
therefore may not be available to quite so
many people. Further, very few accounts did
not have conditions on the withdrawal of
money, whilst many technically qualify as
‘easy access’ a large proportion of the
accounts limited the number of withdrawals
or even went so far as to impose penalties
on certain withdrawals. Similarly, a high
number had certain bonuses, such as high
introductory interest rates which then
dropped after a certain time period had
expired.
In another piece of positive news, the
ISA system is experiencing an overhaul
which should mean that customers can
transfer cash from low earning bank accounts
to providers offering high interest rates in
ISAs very quickly, rather than the standard
several months that some people have been
experiencing. The banks hope that this will
encourage more people to put money into ISAs,
many of which are not instant access,
affording some much needed secure cash for
the banks.
The survey did, however, find that there
were still a number of accounts that
operated without caveats, and offers proof
that even at the moment there are very good
deals to be found. If you are looking into
new
current accounts you should direct your
research to the banks that have dealt most
readily with the credit crisis, banks like
Alliance and Leicester, recently part of the
global Santander group, are offering
particularly good deals at the moment and
are well worth consideration.
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