Although they've had hard times for the past few years the tide is finally turning in favour of savers and investors, and rather perversely it's due to the onset of the credit crunch. Many retired people reliant on monthly interest payments to fund their day-to-day living previously found the going tough as their income dropped along with the base rate. But, despite four interest rate reductions, financial institutions competing for savers' cash to improve overall liquidity ratios, are offering tempting interest rates.

Indeed, it is because major financial institutions are finding it hard to raise funds on the wholesale markets that they are turning to savers in an attempt to fund the gap in their mortgage lending. Not only have banks and building societies been forced to drastically cut the amount of mortgage products on offer due to difficulties in obtaining reasonably priced wholesale funds, but they have also tightened their lending criteria.

As a result the number of mortgage completions has fallen dramatically since the start of 2008 as financial institutions turn their marketing focus towards raising cash they can subsequently lend to borrowers through better offers for UK savers. Until trust is restored in the international banking arena and institutions start lending to each other again, the trend towards attracting retail funds looks set to continue for the foreseeable future.

And in response to the banks and building societies increased marketing activity towards savings accounts there has been a rush to deposit cash in high interest savings accounts from many affluent savers as they seek to take advantage of the excellent rates on offer.

Indeed, those already excellent offers get even better if you move from the high street network to investing online, with many institutions able to offer even higher rates through their internet bank operation. The relatively cheap costs of maintaining accounts online for banks and building societies enable them to shave a little off their margin and pass it on to astute internet customers.

The best online high interest savings accounts should offer a rate which equates to a return in excess of inflation after tax has been deducted. That is unless you are a non-taxpayer, in which case the gross rate applies, which for the best savings offers online should easily outstrip the current inflation rate.

If you are tempted by an online savings account, as with anything of a financial nature, make sure that you do extensive homework first, and if necessary get independent financial advice before committing yourself.

Disclaimer:
This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.