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Last Updated: Thursday, 13 September 2007, 12:59 GMT 13:59 UK
Savings rates hit six-year high
Cash in hand
Saving has suddenly become much more attractive
For the first time in six years, it is now possible to earn interest on your savings of 7%.

The recent rise in the cost of lending between banks, which has pushed up some mortgage rates, is now leading to higher savings on some accounts.

The Stroud and Swindon building society has launched a one-year investment bond offering 7.05%.

And the Standard Life bank is also offering a similar deal at 7%, although for just six months.

The financial information service Moneyfacts said that in the past two weeks, 20 different banks and building societies had raised at least one of the interest rates they offered to savers.

Rachel Thrussell of Moneyfacts said some rates had gone up by 0.35 percentage points.

"Lenders are looking for alternative ways to fund their mortgage lending, and it seems as if increasing deposits has been the first port of call for many," she said.

"A return of 7% is quite outstanding," she added.

Good news?

Most attention has focused on the effect that the banks' recent liquidity crisis is having on their mortgage rates.

In the past day, the Abbey, Halifax and Standard Life have raised the rates on their tracker mortgages for new borrowers.

And the Governor of the Bank of England, Professor Mervyn King, warned that the cost of borrowing generally might be pushed higher.

"These changes... are likely to have consequences for the wider economy through the interest rates for borrowing and lending faced by households and companies," he told MPs this week.

For savers, who greatly outnumber mortgage borrowers, this is good news.

There are roughly seven times as many people with savings accounts of one sort or another as there are people with mortgages.

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