The flip side of the current mortgage famine is that banks and building societies are now so enthusiastic about attracting new deposits that rates for savers are more attractive now than they have been for quite some time. And while interest rates on savings accounts are good, however, interest rates on regular savings plans are even better.

There is no restriction on the number of regular savings plans an individual can maintain, so it is possible to keep several accounts in different banks and building societies.

If the rates of return are so attractive, what are the drawbacks of regular savings plans? They are not so much drawbacks, or catches, as points to keep firmly in mind before committing yourself to the plan. The first of these is that the "regular" means just that. Once you have agreed the amount you wish to deposit each month, that amount must be maintained month in and month out, for the agreed period of the plan. If you miss a deposit, then a penalty is often imposed by a reduction in the rate of interest earned. Most plans also have an upper, maximum limit on the size of the deposit that can be made each month, so the option of adding any unexpected windfall to your savings plan is precluded.

A regular savings plan, therefore, may be something you wish to consider, but is not especially flexible. The plans are also relatively short-term and typically run for a year, so it is necessary to decide whether you will be able to maintain the commitment to regular monthly savings for that period. To get the best rate of interest, you should also expect the plan to be relatively inflexible when it comes to access to your savings during the agreed term. Any withdrawals, for example, are likely to attract penalties in the form of big reductions in the rate of interest applied to the remaining balance.

At the end of the savings plan period, you are free to withdraw the savings in the account or, by default, the proceeds are likely to be switched to the bank's or building society's standard savings account (at a considerably reduced rate of interest). So you may wish to keep this end date firmly in mind and think about shopping around for another, new regular savings plan if you want to maintain your savings at an attractive rate of interest.

When calculating the actual return you should expect from a regular savings plan, it is important to remember that the sum being saved is growing relatively slowly on a monthly basis. In the initial months of the plan, therefore, the rate of interest is applied to a reasonably small level of savings and it is only towards the end of the plan that the rate is applied to the accumulated savings to date. This seems a quite obvious and straight forward point to make, but it is nevertheless something that has led to some savers believing that their regular savings plan has failed to deliver all that they had expected.