Savings rate war sparked by interest rate rise

Last week’s rise in interest rates to 5.75 per cent has caused consternation among both mortgage holders and first time house buyers.

However, savings accounts have also been made potentially more lucrative from the rise, which has in turn sparked a rate war between providers.

One internet savings account – ICICI Uk – is now paying a full 0.55 per cent above the base rate by offering 6.3 per cent. Supermarket banks Sainsbury’s and Icesave are also now offering 6.25 and 6.2 per cent respectively.

All three carried the Bank of England’s 0.25 per cent rise to customers, and will offer the new rates on the same day as it comes into effect: August 1st.

Currently, Icesave offers the longest guarantee to remain 0.25 per cent above the base rate – extending until October 2009.

This follows more good news for savers, as National Savings & Investments also raised the interest rate on its popular ‘children’s bonds’ to a fixed rate of 5.1 per cent late last month. This followed rises in gilt yields (returns from government bonds).

Tags: supermarket banks sainsbury, england, rate rise, Mathematical finance, government, interest, first time house buyers