Banks offering higher savings rates

Rising inflation has led to a wider spread of pay deals

Savings rates are at their highest level for more than seven years as banks fight to get customers through their doors, figures have showed.

The best paying no notice account, the most popular type of savings account, is currently offering a rate of 6.4% - 1.1% more than in December 2006 when the Bank of England base rate was last at 5%.

Financial information group Moneyfacts.co.uk said rates on these accounts had not been over 6% since April 2001, when the Bank base rate was 5.5%.

The biggest increase in savings rates since December 2006 has been on fixed rate bonds, with these now paying returns of up to 7.15%, a rise of 1.3%. Internet accounts, notice accounts, monthly interest accounts and accounts with introductory bonuses are all also paying at least 1% more than in December 2006.

Moneyfacts said since the beginning of May, it had received 94 changes to savings products in which providers had raised their rates, despite the fact that the last movement in interest rates was down.

Michelle Slade, analyst at Moneyfacts.co.uk, said: "This is an unprecedented amount of increases following a base rate cut and is not something we have seen before."

Despite the mortgage market shrinking, the group said during the past year the number of variable rate savings accounts on offer had increased from 960 to 1,067, while the range of fixed rate accounts had risen from 394 to 426.

Ms Slade said: "Institutions are adding a wider variety of accounts to their range in order to ensure they have an account to suit every saver's needs, rather than having the saver go to its competitor."