Raise your interest in banking from home

Savers looking for decent rates are being strongly urged to get out of branch-based accounts and go for telephone, postal, internet and mini-cash Isas instead. Many savers will find their rates cut again from the start of next month.

Halifax, Cheltenham & Gloucester and several other institutions last week announced further cuts to savers' accounts - and rates could fall even further if base rates are reduced again. If you don't take an interest in your accounts, you could can end up earning rates as low as 0.1 per cent.

Cheltenham & Gloucester, for instance, is to cut the rate on its Direct Transfer account from Wednesday by 0.4 per cent, from 4.5 to 4.1 per cent. This reflects 0.25 per cent base-rate cut announced on 18 September and the subsequent 0.25 per cent 10 October cut which brought base rates to 4.5 per cent.

Melanie Stewart of research group MoneyFacts, which monitors interest rates believes the writing is on the wall for traditional branch-based accounts. She advises: 'If you can manage your finances by telephone or the internet, you will get better rates.'

Nikki Foster of independent financial adviser Chase de Vere agrees: 'The overheads [for financial institutions] are a lot lower in internet accounts. And even a postal account will offer a better rate of interest than branch-based accounts.'

The Halifax - which has redesigned all its savings accounts in the past three years - takes four main issues into account when setting interest rates. It prices 'by channel of distribution', by the frequency of transaction on the account, by the value of the investment in the account and by reference to its high street competitors. Rates on its WebSaver account, an internet account, have typically been 4 per cent higher this year than on its lowest-paying account, Liquid Gold.

'Liquid Gold is for people with small balances who want to transact frequently,' says spokesman Ian Beggs. 'The transaction volumes on that account are higher than on any other savings account. Many people are using it like a bank account.'

Monitoring interest rates has become more difficult now that financial institutions offer so many different types of account, tiers in accounts and complicating factors such as a higher interest rate if there are few transactions on the account. But now that rates are so low, the institutions find it hard to cut rates which are already below 1 per cent. Future cuts are likely to hit people with higher balances, says Stewart.

Chris Lynas, fixed-interest specialist at fund manager Smith & Williamson, expects rates to fall further still over the next few months: 'We expect base rates to fall to 4 per cent and to stay there for six to nine months. The Bank of England [whose Monetary Policy Committee sets the base rate] is more concerned about the international position than domestic concerns.' Lynas expects US interest rates, currently 2.5 per cent, to be 2 per cent by the end of this year. A 3.75 per cent rate in Euroland and 1.38 per cent in Japan also exert a downward pressure.

An examination of the best rates on offer shows that the best mini-cash Isas are still over the 5 per cent mark - as are the top internet accounts.

Mini-cash Isas are expected to attract a lot of atten tion from investors in the last few months of this financial year, which ends on 5 April. Up to £7,000 can be invested in an Isa each year. Many wealthier investors would usually put all of that sum into equities - but with the current economic uncertainties they may decide to be more cautious and take advantage of the mini-cash Isa rules instead. You can put up to £3,000 a year into a cash deposit Isa. Income (and capital growth) on Isas is tax-free.

Foster says the best mini-cash Isa rates are now very competitive in comparison with other deposit account rates: 'You should be looking at cash Isas even if you are not a taxpayer.'