Now could be the time to get into a fix

Savers who do not need instant access to their cash should consider switching to a fixed-rate savings product, as providers have been falling over themselves to sell top-paying accounts in the past week.

In one 24-hour period, West Bromwich building society, Anglo-Irish bank, Portman, Norwich and Peterborough and Heritable Bank all launched fixed rates paying over 5 per cent before tax. This means that for the first time in over a year fixed rates look like better buys than most variable-rate savings products.

Banks and building societies have been upping their rates because swap rates - at which City institutions lend money between themselves - have moved up dramatically in the past week in anticipation of a Bank of England rate rise.

'In the past people had been largely opting for fixed rates for peace of mind - but now you are getting a better rate than on other accounts,' says Susan Hannums, savings manager at Chase de Vere investments. 'Rates on variable accounts would now have to go up a lot for you not to be getting a good deal on a fixed rate.'

For savers over the age of 50 who are happy to lock away their money for one year, the Portman building society now has the highest paying account at 5.25 per cent gross, with a minimum initial investment of £1,000. Birmingham Midshires is paying 5.16 per cent gross for a year on a minimum investment of £1, while West Bromwich is paying 5.2 per cent on its internet-only account.

For a two-year fix, the Norwich and Peterborough building society is paying 5.25 per cent gross for a minimum initial investment of £1,000. And, for those who are happy to fix their rate for three years, Heritable Bank is paying 5.31 per cent before tax on a minimum initial investment of £2,000, while the over-50s can get 5.55 per cent gross with the Dunfermline building society.

Fixed-rate accounts won't suit everybody, though. They are recommended for those who know they will not need access to their money for a set period; withdrawing funds early typically results in a loss of interest or other financial penalties.

For those who want a variable account, the highest paying is from the Chelsea building society with a 5.1 per cent interest rate before tax. It has a 40-day notice period for withdrawal and includes a 0.6 per cent bonus for 12 months.

As savers start to benefit from an upward move in swap rates, homebuyers are faced with more expensive fixed-rate mortgages. 'It has been chaos on the mortgage market, with lenders pulling their rates left right and centre and launching new, more expensive fixed rates,' says Nick Gardner of mortgage broker Chase de Vere. 'That has left variable rates looking better value in comparison. For example, the best two-year and five-year fixes are now from Direct Line at 4.49 per cent and 4.89 per cent respectively. Compare that to the best variable deals such as that from the Portman, which has a two-year 4.19 per cent discounted rate.

'That means you could take that and absorb a quarter-point rate rise and still be paying a lower rate than the best two-year fix currently on the market.'