But this success is coming at a cost: banks are seeking to widen profit margins on many retail products at the expense of customers. Consumers therefore need to be on their toes and move their money elsewhere if they are not getting a competitive deal.
The Bank of England voted to keep interest rates on hold at 5.25% this month, but the impact of last month's rate cut is still filtering through and savers seem to be bearing the brunt of the banks' margin-widening process.
Many of the big-name institutions have slashed rates by more than February's quarter-point Bank rate reduction. Barclays has cut its savings rates by an average of 0.39 percentage points according to research by moneysupermarket.com and that is in addition to cuts it imposed on some accounts in January.
Savers in some of the most popular accounts have also been heavily let down by their provider. Halifax's Websaver and Egg's internet savings accounts have pulled in huge sums of money over recent years because they consistently rewarded customers with a competitive rate of interest. However, they are now looking much less attractive.
Egg slashed its rate by 0.5 percentage points to 5.00% following last month's rate cut and the rate on Halifax's Websaver without a cashcard has fallen by 0.4 points. It now pays between 5.01% and 5.10% depending on the balance.
It's not all bad news for savers
However, while banks and building societies are short-changing customers in many areas, there are still some great deals available which consumers should look to take advantage of.
The credit crisis is having a two-pronged effect - on the one hand institutions are looking to recoup revenue because of the bad-debt write-offs and are therefore widening margins on some products. But on the other hand, there is a severe shortage of funds available on the wholesale markets - this is where banks borrow some of the money used to fund mortgages. Consequently, institutions are having to pull more money in through retail deposit accounts which can then be lent out to mortgage and loan customers. This is resulting in some fantastic savings rates.
What are the best savings deals available?
Banks and building societies rely on the fact that most customers never bother switching accounts - that is why they are able to get away with manipulating their margins as they do and short-changing so many customers following Bank rate changes.
However, the best accounts are paying in excess of 6.00% which is incredible, given that Bank rate is 5.25% so now is the time to break this habit of inertia - if you are earning a poor rate on your savings, or you provider has slashed the rate by more than the recent cut in Bank rate, then move your money elsewhere.
When comparing deals watch out for catches such as introductory bonuses, or 'easy access' accounts that penalise you for making withdrawals. For example, Alliance & Leicester's esaver is advertising a rate of 6.50%, but you do not earn any interest in months when you make withdrawals so you could end up earning significantly less than that over the course of a year.
If you dip in and out of your savings, Kaupthing Edge has the best catch-free easy access account. It pays 6.50% on balances above £1,000. Alternatively, ICICI Bank also has a competitive deal with no strings attached - their account pays 6.16%. Another big plus on the ICICI Hisave account is that the rate is available on balances above £1. Kaupthing Edge requires a minimum of £1,000 to be deposited.
Bradford & Bingley also has a competitive deal for those with less than £1,000 to deposit. Its Internet Saver 2 account pays 6.15% on balances of £1 or more.
If you are willing to lock your money away, you can earn an even higher rate on your savings. Kaupthing Edge is paying 6.86% on its one-year fixed rate bond.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.
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