Look for the saving grace

Look for the saving grace

If the recent turmoil in equity markets has been bad news for those with a big shares portfolio, it has been heaven-sent for savers. Following a rush of new accounts on to the market this week, it is now possible to open an easy-access savings account paying 6.5%.

Fixed-rate bonds are paying closer to 7% - and there are a few tax free Isas paying more than 6%.

With banks desperate to get money in and stockmarkets drooping, the savings rates on offer are now so good many people think they are the best home for your cash.

Instant access

Last year an Icelandic bank, Landsbanki, took the savings market by storm with its IceSave account. This week another relatively unknown Icelandic bank, Kaupthing, joined the battle for the UK's savings with a new account paying a table-topping rate of 6.31% gross (6.5% AER).

But such is the level of competition within the market that just hours later West Bromwich Building Society unveiled a new instant access account paying an even higher rate - 6.55% for annual interest payments. Then Abbey upped the rate on its eSaver Direct account by 0.5% to 6.5%, available from Monday. But the rate includes a 0.5% bonus which drops out after 12 months.

The Kaupthing Edge (kaupthingedge.co.uk) account is available to customers from today and guarantees to be at least 0.3% above base rate until February 2012. It can only be opened online, with a minimum investment of £1,000 and a maximum of £1m.

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West Brom's Star Easy Access account pays slightly more and is also available now - the main difference is that it pays 6.36% if the interest is paid monthly. You only need £1 to open an account - the rate is guaranteed to be at least base rate plus 0.5% for at least the next 12 months. The account is available via its branches, post, phone or internet.

Cash Isas

For anyone new to saving, and who still hasn't got a cash Isa, sign up for one now as this is the easiest financial decision you'll ever make.

Cash Isas allow you to save up to £3,000 a year (£3,600 after April 6) tax free - no tax is deducted from the interest rate paid.

The top rate in the market at the moment is offered by Scarborough Building Society. It is currently paying 6.3% although you have to have a minimum of £1,000 and be prepared to give 90 days' notice of any withdrawals. You are allowed to transfer in Isa balances with other banks. A spokeswoman says the building society is committed to keeping the rate "competitive" over the coming months.

Perhaps the better bet, given that interest rates look set to fall, are Bradford & Bingley's and Northern Rock's one-year, fixed-rate Isas both paying 6.2%. B&B wants a minimum £1,000 and you have to lock your money away for a year. The offer is only available from branches until they close today.

Again, Northern Rock is also offering a one-year fixed Isa paying 6.2%, which should be around for some time - the minimum deposit is £500.

Moneyfacts says consumers can expect to see new Isa products start to appear as we get closer to the start of new tax year.

Fixed rates

Kaupthing has not only shot to near the top of the easy access list, it is also offering the second highest paying fixed rate bond - behind Northern Rock.

Kaupthing's one-year fixed-rate account pays 6.86%. It also has a six-month bond paying 6.69%.