BANKS are slashing interest rates on popular savings accounts by up to half a percentage point, even though the Bank of England cut its rate by only a quarter point earlier this month.

Egg, which caused uproar when it announced it would cancel the cards of 161,000 customers, has chopped the rate on its Internet Saver account by half a point to 5%. This comes just a month after it cut rates on the same account, which once appeared in the best-buy tables, by a quarter point.

Most of the big names such as Lloyds TSB and Nationwide have still not announced how they plan to change rates. Those that have, such as Icesave and government-backed National Savings & Investments, have typically dropped their rates by a quarter point.

NS&I has overhauled its fixed-rate bonds, scrapping its fixed-rate savings, pensioners and capital bonds and replacing them with two new types of bond: Guaranteed Growth and Guaranteed Income. The rates on the new bonds are equivalent or slightly better than their predecessors. The one-year guaranteed growth deal pays 3.95% before tax. The three-year bond pays 4%.

There are better options, though. Icelandic newcomer Kaupthing Edge is paying 6.86% on its one-year bond, but requires a £5,000 minimum deposit. ICICI pays 6.85% on deposits of £1. Icesave has the best three-year deal paying 6.5% on £1,000.

West Bromwich building society is paying the best rate on regular deposit accounts. Its new Star Easy Access savings account pays 6.55% on deposits of £1. It guarantees the rate will match Bank rate plus half a point – 5.75% – until next February.

Abbey is paying 10% tax free on its Super Isa. For a higher-rate taxpayer that is equivalent to nearly 17% on a taxable account. But to qualify you have to place an equal amount in its stock-market-linked Guaranteed Growth Plan, tying your money up for a fixed period.