IT HAS been a long time coming, but the prospect for savers at last appears to be improving. Three rate rises in just over six months have improved the returns on many accounts by 0.75 of a percentage point. Meanwhile, hot competition in the savings sector has led some banks to offer new and tempting deals.

Next Wednesday, Alliance & Leicester will launch its first internet-only savings account with a market-leading rate of 4.85 per cent. Rate-chasers will find a better deal, but only if they take into account introductory offers.

Egg’s internet account tracks the base rate, so it pays 4.25 per cent, but it now carries a six-month introductory bonus of 0.75 of a percentage point, taking the rate to 5 per cent. Existing customers are welcome to open a new savings account if they wish to take advantage of the offer.

Meanwhile, Lloyds TSB has upped the ante in the current account war, raising the rate on its Plus current account to 5 per cent from June until September 2005 for new customers paying more than £2,000 into their accounts each month.

New customers who deposit between £1,000 and £2,000 each month receive 4.33 per cent on balances in credit. Existing customers receive 4 per cent interest.

Despite frantic one-upmanship at the top end of the best- buy tables, many banks and building societies remain lethargic.

The majority, including Halifax, the UK’s largest savings bank, and Nationwide, its largest building society, have yet to change interest rates after the Bank of England’s decision to raise the base rate last week.

The good news, says Chase de Vere, the independent financial adviser, is that those that have announced changes have passed on the full quarter-point rise.

However, this is not the case at Intelligent Finance, which has chosen to freeze its savings rates, despite passing on the full quarter-point rise to borrowers. Other banks have been more generous. Abbey has passed on a quarter-point to almost all savers, though some benefit from particularly generous increases, of up to 0.55 of a percentage point. A few will see rises of just 0.2 percentage points.

HSBC and Direct Line will pass on a quarter-point increase to all savers, while Britannia Building Society says it will raise some of its rates by half a point from June 1, though some accounts, including the regular savings, rise by just 0.15 of a percentage point.

The battle lines have been drawn in the fixed-rate savings market, too. Better money market rates, which reflect the likelihood that the base rate will go higher, mean that banks and building societies are offering better deals on fixed-rate savings accounts.

Birmingham Midshires Building Society, Capital One Bank, Yorkshire Building Society and Chelsea Building Society have all lifted their fixed savings rates over the past few weeks.

Birmingham Midshires now offers a one-year fix at 5.26 per cent, while the best two-year deal comes from Lambeth Building Society, which pays 5.51 per cent. Savers prepared to lock up their money for five years can get a return of 5.67 per cent from Capital One Bank.

Given that interest rates are likely to rise — probably by as much as 0.75 of a percentage point — this year, opting for a fixed rate may not be such a good idea. Nevertheless, Sue Hannums of Chase de Vere likes the one-year fix.

She says: “The likelihood is that rates will rise this year, but it will take some catching up for variable rates to reach the levels offered by the best one-year fixed-rate deal. The thing to remember with variable- rate deals, which include bonuses, is that once the bonus runs out, they might not look so competitive.”

GRAINNE GILMORE