Northern Rock sparks savings rate war

Northern Rock launched a price war in the savings market this week with a string of rates aimed at savers with a small sum to deposit and who prefer to use a branch rather than go online. The nationalised bank is offering a 90-day notice account paying 2.5% interest on balances from £1 available from its branches, with interest paid annually. The rate compares favourably with branch-based accounts at the big banks. Halifax pays 1.5% on its Guaranteed Saver Reward account, but that drops to 0.5% after one year. It offers a more attractive 2.8% on its Web Saver account, but for online customers only. Santander pays 2.5% on its Instant Access Saver (Special Issue 3) but this drops to 1.5% after one year. Nationwide has a 2.52% 60-day notice account, Champion Saver, but this includes a one-year 1.1% bonus. Accounts that require you to put aside an amount each month, pay higher rates. The best-buy notice account is United National Bank , which pays 3.02%. Its deposits are covered by the Financial Services Compensation Scheme. Northern Rock is also offering a one-year cash Isa fixed at 3% on deposits above £500, called Isa Breaker. No transfers in of existing accounts allowed. The rate puts it just below the one-year deals on offer from Coventry building society (3.25%, min deposit £5,100) and Kent Reliance (3.2%, min deposit £100). But it places it on a par with the Post Office 's 3% one-year Isa which has a minimum deposit of £500. Northern Rock has also launched a children's account called Little Rock paying 3%, but this is significantly less than the 6% paid on Halifax's Children's Regular Saver account, which has a ceiling of £1,200 compared with £10,000 at Northern Rock. All new account at Northern Rock qualify for the £50,000 FSCS compensation limit. Most of the bank's poorly performing loans were split off into a "bad" bank in January, leaving managers to prepare a "good" bank for a quick sale and return to the private sector.