Interest rates of 3.00% - 4.00% may not sound impressive, but with the base rate at just 0.5% and the average no-notice savings account paying even less - 0.15% according to the Bank of England - you'd be hard pressed to find a time when you could do much better.
What's more, such returns relative to base rate won't be available forever, so you should take advantage while you can.
Cash ISAs
New ISA rules take effect next month and this is resulting in some 'unseasonal' activity in the cash ISA market.
From 6 October, the over-50s will benefit from an increase in the annual ISA allowance - it is rising from £7,200 a year to £10,200 and the cash ISA element of that allowance will be £5,100 (up from £3,600 at the moment). The new higher limit will apply to anyone who is 50 on or before 5 April next year. All other savers will have to wait until the next tax year, which begins on 6 April, to benefit from the higher limit.
We're already seeing a number of banks and building societies gear up for the anticipated upturn in demand for ISAs next month as the over-50s look to top up their ISAs. Abbey and Bradford & Bingley for example, both part of the Santander Group, have recently launched two-year fixed rate ISAs paying 3.50%. Halifax and Principality Building Society also have two-year deals paying the same rate.
The leading easy access ISA rate is slightly lower at 3.00% - this is First Direct's e-ISA.
However, savings experts are advising that you hang fire for a few weeks if you're thinking of opening a cash ISA. Obviously the over-50s can't make use of the higher limit until next month and as we get closer to the 6 October we could see more new deals come to market and more competitive rates become available.
Easy access accounts
If you're looking for a new home for your everyday savings, an easy access account is the best bet.
Among the leading deals are ING Direct's Savings Account which is paying a rate of 3.20% - this is guaranteed for 12 months although it will then drop to the standard rate which is currently 0.50%. Birmingham Midshires' Telephone Extra Account is paying 3.15% - a rate which includes a 12-month bonus of 2.65%. And Citibank's Flexible Saver Issue 5 has a rate of 3.10%, this includes a bonus of 2.10% which lasts for 12 months.
As you'll see, the headline rates on all the leading easy access accounts are introductory offers so the key is to take advantage of the high rate while it lasts and then be prepared to move your money again to another competitive deal when it ends.
Fixed rate bonds
Savers with money they can afford to lock away continue to have access to the best rates. West Bromwich Building Society's E Bond 36 is paying a fixed rate of 5.45%.
However, this is a five-year deal and you cannot access your money during the term. With interest rates at a record low, many advisers say now is not the time to be locking your money away for such a long period, as savings rates could climb over the next five years and you may find yourself stuck on a rate that becomes uncompetitive. They therefore suggest not fixing for longer than a year or two.
Bradford & Bingley has launched a two-year fixed rate bond at 4.35%. The AA and ICICI Bank also have two-year bonds paying the same rate. Kent Reliance Building Society's Direct Fixed Rate Bond issue 7 and Birmingham Midshires' Internet two-year bond are paying 4.25% and Abbey has a two-year deal at 4.20%.
If you'd prefer a one-year term, West Bromwich's E Bond 33 is paying 3.90% and this is fixed until 31 October 2010, while the Post Office's One-year Growth Bond has a rate of 3.85%.
As well as the length of the term, the other key thing to look at when comparing fixed rate bonds is the minimum savings amount. Some deals are available on a balance of £100 or more but others require much higher minimums - in some instances £25,000 or more. And usually only one deposit is allowed at the time the account is opened so fixed rate bonds are no good unless you have a lump sum to put away.
Regular savers
Regular savings accounts are also worth considering and they could be more suitable than a fixed rate deal if you want to save small amounts regularly.
Halifax, Lloyds TSB and Norwich & Peterborough all have regular saver accounts paying 5.00%. The rate is fixed for a year and you must pay money into the account every month during the term. However, the minimums are low - N&P requires you to pay in just £1 per month, while Halifax and Lloyds ask for at least £25. The maximum you can pay in is also capped - Lloyds and N&P permit deposits of up to £250 a month, while Halifax allows you to pay in up to £500.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Products underlined can be applied for directly.
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