However, a battle seems to be brewing in the savings market as providers actively seek to attract new money. This means rates are on the up, bringing some welcome relief to those struggling to earn a decent return on their hard-earned cash.
So what rates can you get?
Fixed rate bonds continue to pay the highest rates. Abbey and Alliance & Leicester threw down the gauntlet last week when they each launched a two-year bond paying 4.01%. ICICI Bank has responded by upping the rate on its two-year HiSave Fixed Rate Account to 4.10%.
If you are reluctant to lock your money away for two years in case interest rates start to rise again, ICICI also has the leading one-year fixed rate bond at 3.90%.
The recent activity hasn't been restricted to the fixed rate savings market, there's also been movement with easy access rates. Unsurprisingly, the rates on many accounts have fallen in recent days as providers finally responded to February's half point interest rate cut. But A&L and Sainsbury's Bank have upped the anti. A&L has launched a new version of its Online Saver. Its Online Saver Issue 4 is paying 3.0% and the rate is guaranteed to be at least 0.5% above Bank rate until April 5, 2010.
Sainsbury's Bank has launched an Internet Saver account paying 3.0%. This is a limited offer and savers must apply by March 17. It has a more attractive rate guarantee that A&L's - it promises to pay at least 2% more than Bank rate (which is currently 1%) for 12 months. However, the minimum deposit is higher. A&L's Online Saver Issue 4 is available on balances of £1 or more, while Sainsbury's Bank requires a balance of at least £5,000.
While this is a competitive deal, there are a couple of products paying slightly higher rates. Egg's Savings Account has the highest rate at 3.35%, while the Citibank Flexible Saver Issue 4 is paying 3.26%. Both of these accounts however, include a bonus for the first 12 months and so are best suited to those who are willing to review their savings rates regularly and move around to capitalise on the best deals.
Cash in on Isa rates
The Isa market has also burst into life over the last few weeks and is only likely to continue to be awash with activity as the end of the tax year approaches (the tax year ends on April 5). As you pay no tax on an Isa the rates on these deals simply can't be beaten by any other form of savings account so if you're a taxpayer, they should be your first port of call. You can save up to £3,600 a year in a cash Isa.
The market-leading Isa rate is available from the Saffron Building Society, which offers an incredible 7.0%. This is a regular savings account - the rate is fixed for 12 months and you can pay in between £25 and £300 a month. If you deposit the maximum each month you'll use your full Isa allowance over the course of the 12 month term. Withdrawals can only be made with 180 days' notice. If you need access to your money more quickly than that you will lose 180 days' interest.
However, while the rate on this account is a market-leader it is not the best option if you are looking to invest your full Isa allowance before the end of the current tax year. Also, the Saffron account is only available for new deposits - you can't transfer money invested in previous tax years.
Royal Bank of Scotland's Cash Isa Plus is paying 3.51% - the highest rate among easy access accounts. (This deal is also available under the Natwest brand). Transfers aren't permitted though. If you are looking to move money invested in previous tax years, Natwest's E-Isa accepts transfers and is paying 3.25%.
If you'd prefer a fixed rate, Nationwide and Newcastle building societies and Halifax are offering one-year fixed rates at 3.0%. Newcastle's one-year fixed rate account and Halifax's Isa Direct Reward account accept transfers, so if you have money invested in previous tax-years sitting in an account that is no longer paying a competitive rate, you can move it into either of these accounts.
The Halifax deal permits four penalty-free withdrawals a year, but Nationwide doesn't allow any withdrawals during the fixed rate period and Newcastle requires savers to give 180 days' notice.
For more about the benefits of Isas, watch our video blog "Cash Isas explained" and to compare more savings rates including Isas, check out our savings comparison tool.
And remember...
If you're worried about the security of your savings then spread your money around. The Financial Services Compensation Scheme protects the first £50,000 you hold with a single institution - only amounts above that will be at risk if the bank or building society goes bust. For more information, read our article "Who owns who?"
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.
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