Icelandic banks turn up the heat in UK savings war

The savings rate war in the UK is heating up thanks to a new high-interest savings account launched by Iceland’s biggest bank, Kaupthing.

The savings account, called the Kaupthing Edge, allows instant access and pays a high interest rate of 6.5 per cent. Account holders are guaranteed an interest rate at least 0.3 per cent higher than the base rate offered by the Bank of England which is currently 5.5 per cent. The interest rate is guaranteed up until February 1st, 2012 and the new account requires an initial deposit of at least £1000.

Account holders also have the option of taking out a fixed term deposit account, so long as they keep at least £5,000 in the account at all times. The fixed term deposit account pays 6.86 per cent interest for one year or 6.7 per cent for three years.

According to the website, “The UK savings market is more competitive than it has ever been, and it is highly likely that more new players will be looking to capture a share of the spoils from some of the traditional high street financial brands.”

Another Icelandic bank, Landsbanki, owns Icesave, a popular online savings bank in the UK which offers instant access accounts with rates of 6.3 per cent.