How far would you go to earn 3.5% on your savings?

Today, the average savings account pays a derisory 0.63%, according to Moneyfacts.co.uk. So the news that you can now get 3.5% on your savings will tempt many. Unfortunately, there's a catch. Isn't there always?

Newcastle Building Society is offering to pay 3.5% on deposits starting at £500, but only if you agree to lock your money away for seven years. That means you won't get the bulk of your capital back until 2021, which is so far into the future it sounds like the title of a science fiction movie.

FirstSave offers a similar deal, paying 3.5% a year over seven years. That's quite a stretch. The longer you tie up your money, the higher interest rate you get. So if you only lock it up for five years, the best you can expect is just 3%, paid both by Skipton Building Society and Julian Hodge Bank.

Over three years, you can get 2.7% from Indian-owned Hi-Save or Shawbrook Bank, while over one year you can typically expect around 1.7%. On easy access, you will be lucky to get 1.4%.

Understandably, hundreds of thousands of savers have been willing to lock their money away, rather than see it die a slow death in the open. But I still wouldn't tie my money up for a lengthy period, especially now.

First, you don't know when you might need the cash in a hurry. If you lock it away, you will have to pay hefty penalties to get your hands on your own money. So you should always keep some cash on instant access.

Now is also a dangerous time to shackle yourself to today's low rates. Expectations are growing that the Bank of England will finally start hiking rates from next spring. Some analysts believe the first hike could come in November. Departing Bank of England deputy governor Charlie Bean has just predicted that base rates will hit 3% within three years. That would lift savings rates towards 5% or more.If that does happen, you'll be kicking yourself if you still have four more years earning just 3.5%

Predicting interest rates years into the future is impossible. The wisest thing to do is split your money between instant access accounts and short-term fixed-term deposits. I still wouldn't fix for as long as five or seven years, though. Too much can happen in that time.

If you're a taxpayer, use your cash ISA allowance to keep the Revenue's hands of your money.

Finally, keep shopping around to make sure you're getting the best rate. It's bad enough suffering today's low savings rates, without your own inertia making it worse.