Online saving rates up

Thursday, 11 June 2009 11:53

A trio of online savings accounts have increased their rates.

Principality Building Society is launching a new e-Saver account at 2.85 per cent - 1.20 per cent higher than the previous issue.

Intelligent Finance has hiked the rate on its iSaver by 1.1 per cent to 2.85 per cent and Barnsley Building Society is up 0.40 per cent to 2.50 per cent.

With the fixed-rate bond market providing so much competition, smaller providers are moving to attract savers by pushing up the rates on online savings accounts.

The average rate on online based accounts is now stands at 0.95 per cent - compared to 0.50 per cent for branch-based accounts.

"Online based accounts are cheaper and easier to run for providers and this saving can be passed on through higher rates," said Louis Kaszczak, head of Moneyfacts.co.uk.

"Our research shows that one in three savers are looking for easy access accounts, so it is a market that providers are wise not to ignore.

"Despite no change in bank base rate, savers are seeing the benefits through increased rates as many providers continue to look to their savings book to fund their lending activities."

Julie-Ann Haines at Principality explained the rise in rates has been planned for months and is part of the building society's plans to offer products for those with more to invest - such as bonds - and those with less.

He added some customers are rate sensitive, but the building society tries to offer consistent interest rates.

"The product has been a good price over 18 months and we have a loyal base of customers. Half are in Wales and half in the rest of the UK, so we are reaching a wider audience," she said.

She added the average age of customers on Principality's internet savings accounts was 51.

A spokesperson for Intelligent Finance said the increase in rates on their account was part of their commitment to savers who have lost hit hard as the Bank of England has cut base rates.

"It is important to look at the margins between base rate and savings accounts," she said.

She explained the margin above the base rate for the best savings accounts is now as high as it was when rates were higher and people looked fro six per or seven per cent on savings as the norm.

"The interest rate rise also includes all customers, not just new ones, so it is a reward for long-term savers."

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