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ICICI Bank launches new fixed-rate range as rates continue to crumble

Savings woe: Rates have continued to plummet at a rapid pace

Savings rates continued their downward spiral throughout May and June to leave savers with a miserable choice of accounts.

Best buy easy access rates have almost halved in a year and there are very few exceptions to the downward trend - although Indian bank ICICI today provided a rare ray of light.

It has upped the rates on two and three fixes to match best buys to 2.3 per cent and 2.55 per cent respectively. It has also raised its five-year fix to 2.75 per cent.

The cataclysmic effect of the Funding for Lending scheme which launched last August, enabling banks and building societies to tap into cheap money from the Government rather than rely on savers, can be clearly seen by the differences in rates now compared to just 12 months ago.

According to data from information website Moneyfacts, the average best buy rate on the top five easy access accounts, including bonuses, this time last year was 3.11 per cent.

Now the top five best buy accounts with a bonus pay an average of just 1.66 per cent.

BONUS-FREE SAVINGS

Bonuses on savings account boost rates but when these fall away the return can plummet, catching out unwary savers.

A year ago the best non-bonus account paid 2.68 per cent, now NS&I's Direct Saver pays 1.75 per cent and savers only have three bonus-free easy-access account to choose from.

Savers could have grabbed 3.2 per cent on the best buy easy-access last year – the Santander eSaver Issue 5, which included a bonus of 2.7 per cent for one year.

The best you can do today is a 1.75 per cent rate from the National Savings & Investments Direct Saver.

The Santander account was 1.45 points higher than today’s best buy.

The current version of the Santander eSaver - its Issue 10 - offers just 1.25 per cent, or 1.95 points lower than the same account it offered a year ago.

  More... Can you find a better rate?: Cash Isa tables Can you find a better rate?: Fixed-rate tables Can you find a better rate?: Easy-access tables

Isa savers see rates dive too

In the cash Isa stakes, the average best buy cash Isa in June last year was 3.1 per cent with a bonus and 2.68 per cent without. Today, the best buys offer 2.31 per cent and 2.18 per cent respectively.

According to Moneyfacts, savers could have grabbed a 3.35 per cent cash Isa with Cheshire Building Society, with a 2.35 per cent bonus, in June last year. Marks & Spencer Money was offering three per cent without a bonus with its Advantage Isa.

Today, the best buy with a bonus is still Cheshire BS with a 2.3 per cent rate, or 2.25 per cent with the NS&I Direct Isa without a bonus.

Elsewhere, fixed-rates have been hit hard too. A year ago the average one-year fixed account best buy offered 3.36 per cent, two-year 3.69 per cent and five-year 4.5 per cent.

Today, this has slipped to 1.93 per cent for one-year, 2.24 per cent for two-year and 2.72 per cent for five-year.

 

The best one-year fix 12 months ago came from United National Bank paying 3.45 per cent, best two-year was 3.75 per cent from BM Savings and top five-year was 4.63 per cent from Clydesdale Bank.

Now, the best one-year is via State Bank of India at two per cent, the top two-year is 2.3 per cent from ICICI Bank and in the five-year stakes, Virgin Money offers a three per cent rate

Rachel Springall of Moneyfacts, said: ‘Savers are fighting a losing battle, rates are still falling due to the Funding for Lending Scheme and it shows no signs of stopping.

‘Customers will find that they will need to lock their money away for five years to get three per cent in the current market, when a year ago they could achieve this with an easy access account or a much shorter term bond.’

However, experts warn that savers shouldn’t be looking at long-term fixes for a better rate. Martin Bamford, from independent adviser Informed Choice, says: ‘It would be madness to lock your money up for five years with rates so low.’

ICICI Bank bucks the fixed-rate cut trend

Indian-based ICICI Bank has upped the rate on two of its HiSave fixed-rate accounts and also launched a higher five-year rate.

Its two-year fixed rate has increased from 2.2 per cent to 2.3 per cent, equalling a deal offered by the State Bank of India. Both require a minimum deposit of £1,000.

The three-year fix has risen from 2.4 per cent to 2.55 per cent, equalling the rate offered by Saga. Again, it requires a £1,000 deposit – whereas the Saga deal needs a far heftier £50,000.

The five-year rate comes with a 2.75 per cent rate, but Virgin Money offers a three per cent five-year fix.

ICICI is fully covered by the Financial Services Compensation Scheme, meaning that deposits are protected up to a maximum of £85,000 per person.

High street banks are few and far between when it comes to fixed-rate savings deals. The This is Money independent saving table is dominated with less familiar names such as Islamic Bank of Britain, Aldermore Bank, Leek United Building Society and Kent Reliance.

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