Another loss for savers as competition dwindles

The rates on offer for savers have been falling, while a rare inflation-beating product proved so popular it has been withdrawn.

The big news on the savings front this week is that the Index Linked ISA from National Counties Building Society which pays 1% plus any increase in the Retail Prices Index over the coming five years has proved so popular that it was withdrawn this week - having been available for only 10 days from its launch on 16th August.

Open for a few

Some people will still be eligible to invest.  National Counties says that for a limited period it will continue to accept applications and transfer requests from new and existing customers who have already received an application pack or applied using the online service. ‘These pack-holders and online applicants must act quickly to finalise their application submissions in order to avoid disappointment as this product is a limited issue and will be closed without further notice once it is fully subscribed or by 30th September 2010 at the latest, in readiness for indexation to commence on 1st October 2010,’ says the society.

Customers wishing to transfer-in an existing Cash ISA should note that all valid requests received and acknowledged by the Society as having been accepted must be completed by 30th September 2010 too.  ‘Unfortunately, the time taken to complete a transfer is largely outside of the Society's control as it depends on the existing Cash ISA provider acting promptly. Around the middle of September we will write to customers whose transfer-in requests remain outstanding, so that appropriate contact might be made with the existing provider,’ the society advises.

Best of the rest

The next best bet for those prepared to lock up their money in a tax free ISA for longer periods is the range from Halifax.  It has a fixed rate ISA paying 4.25% over four years with a minimum investment of £500. This compares well with the best rate on a variable rate ISA from Santander paying only 2.75% - and this includes a 2% bonus for the first 12 months, so the Halifax range generally looks a better bet.  Halifax also has a three year fixed rate ISA paying 3.35%, a two year version at 3.0% and a one year product paying 2%.  You can open an account online at www.halifax.co.uk and Halifax accepts transfer in from other ISA providers.

Fixed rate bonds

Generally rates have been falling with ICICI Bank, regularly the market leader in the past, cutting the rate on its HISave one-year fixed rate bond to 3% from 3.1%.   Many others have followed suit and there have been no increases to disturb the deposit takers at the top of the tables.

Rates are so low, however, that in spite of the 0.10% reduction on the ICICI Bank one year bond it remains almost top of the table. Best buy is now Bank of Baroda which remains at 3.15% fixed for one year investments of £500 or more.  You can only open accounts online at www.bankofbarodauk.com.  In fact the bank’s range of fixed rate bonds paying 3.15% for one year bonds, 3.8% for two years, 4.3% for three years and 4.9% for five years are all top of the charts for fixed rate investments. 

But the short term bonds look more attractive if you believe that the Bank of England will be forced to raise interest rates sooner rather than later.  Bear in mind, however, that the gap between BBR at 0.5% and the rates paid on savings account is sufficiently large to allow an increase in BBR to say 1% or more without any rise in savings rates.

There have been other cuts in the best buys too.  Barnsley Building Society has withdrawn its very competitive four year fixed rate bond paying 4.25% and the four year best buy is now comes from ICICI Bank which is offering 4.15% fixed on sums of £1,000 or more.  You can open an account at www.hisave.co.uk.