Savers begin to feel the draught

BORROWERS and savers are begining to feel the effect of the latest interest rate cut, writes Vivien Goldsmith. Most savings rates are coming down over the next few days.

Cheltenham & Gloucester Building Society has cut its savings rates, though borrowers will have to wait until December for their new rate to come through. The rate on the popular London Share postal account drops a full percentage point to 8.6 per cent gross (6.45 per cent net).

The London Share Tessa also drops to the new gross rate - below the Flexi-Tessa, which falls from 10.4 to 9.4 per cent on pounds 100 or more.

Northern Rock discontinued its recently-launched Go Direct postal account last month, and the rate is dropping to, for instance, 9.5 per cent gross on sums between pounds 2,000 and pounds 10,000. The postal account closed earlier pays a slightly higher rate - 9.55 per cent, for example, on the same band.

Best rates on a postal instant access account come at present from North of England's Edinburgh account, paying 10.75 per cent on the top tier of pounds 25,000 and 10.25 per cent on pounds 2,500 to pounds 10,000 plus. The rates are under review and are likely to drop soon, but a society spokesman said the account would remain competitive.

Bristol & West has not yet cut the rates on its Balmoral postal account, which is still paying 10.4 per cent up to pounds 25,000 and 10.55 per cent on larger sums. Norwich & Peterborough's Postmaster has dropped to 8.75 per cent on the first band and the top rate on pounds 30,000-plus comes down to 9.5 per cent.

Cuts at Abbey National, which come into force on Tuesday, range between 0.9 and 1.25 per cent. A spokesman pointed out that the Abbey did not cut its rates in August when many societies trimmed rates by 0.4 per cent.

The instant access account Instant Saver has a new initial rate of 3 per cent (2.25 per cent net) on sums up to pounds 500. The current account rate drops from 2.55 per cent to 1.5 per cent (1.13 per cent net). The closed Saver account drops 1.1 per cent to 0.5 per cent gross (0.38 per cent net) - a real incentive to savers to transfer money in closed accounts.

Nationwide moved its rates last Thursday by just a shade under 1 per cent gross. This brings the FlexAccount rate down to 1.5 per cent (1.13 per cent gross) on sums up to pounds 500 and 2 per cent (1.5 per cent net) between pounds 500 and pounds 2,000.

Meanwhile, instant access accounts move to 3.5 per cent (2.63 per cent) up to pounds 500, 5.6 per cent (4.2 per cent net) on the next tier and 6.2 per cent (4.65 per cent net) on pounds 2,000 to pounds 5,000.

Halifax has not yet announced new rates and says it is considering the whole savings range, which could mean some innovative accounts are on the stocks.

----------------------------------------------------------------- SIX OF THE BEST ----------------------------------------------------------------- Savings Type Account Term *0% *25% *40% Min GIB M & G 5 years 7.75 7.75 6.59 pounds 2,000 B Soc North of England BS Instant 10.75 8.06 6.45 pounds 25,000 Tessa Dudley B/S 5 yrs 11.00 11.00 11.00 pounds 10 *Compounded annual rate except for GIB - guaranteed income bond ----------------------------------------------------------------- Source: Chase De Vere 071-404 5766 Mortgages Type Source Deal Variable Cheltenham & 8.75% including 1% disc for 1 yr Gloucester BS for loans under 80%. Fixed Cheltenham & 8.25% for 2 years pounds 100 fee Gloucester Cap & Collar Leeds Permanent BS 10.65% for 5yrs, pay 9.95% now. ----------------------------------------------------------------- Source: John Charcol 071-589 2626 -----------------------------------------------------------------