It has recently become more and more apparent that banks and Building societies are crying out for you to deposit your money with them. Only a year ago the best savings accounts rates offered were appox. 6.30% AER. Now, only 12 months on, some providers such as Kaupthing Edge are offering 6.55% AER with no withdrawal penalties.

The question is why has there been a sudden increase in rates banks are paying for their savings accounts? Simple, it's all to do with the infamous credit crunch. As soon as the effects of the credit crunch hit, banks instantly pulled back on their lending to each other. Consequently, the extortionate low levels of lending rates were now a thing of the past.

To overcome this cash shortage and to take advantage of the fact banks can now charge higher rates of interest when they lend, they have increased their savings accounts interest rates to encourage cash deposits. You have to take into account that banks can increase their deposit to lend ratio's by 15 times. So if a bank receives £100,000 in cash deposits it can actually lend £1.5million. If the £1.5 million is lent at 10% APR and they are only paying savers 6.55% AER on £100,000 then you can see there is a respectable profit margin.

However, these high rates of interest currently offered may be coming to an end, as banks are beginning to lend to each other again at lower rates. The London Inter Bank Offered Rate (LIBOR) is the level at which banks are lending to each other. This has been falling, and when this level falls below the rates at which banks are paying savers, the savings rates will fall with them.

Since LIBOR is on its way down it is only a matter of time before this takes effect.

The advice at the moment is to lock in the highest rate of fixed term interest possible over the longest duration possible. The best on the market is currently ICICI Bank at 7.2% AER over 1 year or 7.0% AER over 3 years.