Although savings deposited with National Savings & Investments (NS&I;) are guaranteed by the Government and are therefore a safe option, the Government-sponsored bank may not be savers’ best bet, as it has just announced a massive cut of up to 0.75 per cent in interest rates for newly opened fixed-rate savings accounts.

The rate changes will only affect new investments, not existing ones, but they extend to Fixed Interest Savings Certificates, Children’s Bonus Bonds, Guaranteed Income Bonds and Guaranteed Growth Bonds. Rates on the bank’s Inflation-Beating Savings and variable rate accounts remain unchanged.

NS&I; justify the rate cuts with the price of British Government Securities such as gilts which has dropped by 0.73 per cent in the last three months. As the new rates are well below high street banks top rates, effectively the loss in interest is the price customers have to pay for Government-guaranteed security.

However, according to Moneyfacts.co.uk’s analyst Michelle Slade, there have been some positive moves from savings account providers in the last week: “Chelsea BS, Nottingham BS, Scarborough BS and Bank of Scotland have all launched new accounts in the last few days, all of which are paying extremely competitive rates.”

For instance, the Chelsea BS Tracker Bond pays 6.60 per cent and offers a guarantee to pay 1.60 per cent above base rate until March 2010. ICICI Bank, First Save and Icesave all offer over 7 per cent for a one year fixed rate bonds for customers with a deposit of at least £1,000.

There is a hitch to most of those accounts, though, as Ms Slade points out: “However, it seems that the providers are keen to hang on to our money as each of these accounts comes with either withdrawal restrictions or a penalty.”

For those with smaller deposits or looking for a more flexible savings account, Scarborough BS offers a no notice account with a minimum deposit of £1 at a rate of 6.51 per cent gross AER, and the Internet Saver from Bradford & Bingley offers a similar deal. If you pay a deposit of up to £250 and are able save £50 on a monthly basis, the Monthly Supersaver by Darlington BS offers 8.00 per cent gross AER.

Although most banks seem to have adopted a ‘wait-and-see’ attitude and cuts in mortgage rates have slowed down in the last week, Abbey, Lloyds TSB Scotland and Cambridge BS have cut interest rates for their mortgage deals considerably in the last two days.

Despite the current turmoil in the banking world all is not doom and gloom, and Michelle Slade recommends: “By putting some time and effort into shopping around for the best deals, consumers can still make significant savings, which should leave them with a little bit extra in their pockets at the end of the month.”

© Fair Investment Company Ltd