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Long-term Fixed Savings Interest Rates Fall

Personal_Finance / Savings Accounts May 03, 2016 - 02:46 PM GMT

By: MoneyFacts

Personal_Finance

Savers looking to boost their savings pots will no doubt look for accounts that pay the highest rates of interest, which typically come from long-term fixed rate savings bonds. However, savers may be disappointed by the deals on offer for rates in this sector have recently hit new lows thanks to an onslaught of rate cuts.


The latest research by Moneyfacts.co.uk reveals that the average five-year fixed rate savings bond now pays a miserly 2.28%, down from 2.50% a year ago and 2.56% in 2014. A similar downward trend can be found among five-year fixed ISAs: the average rate in this sector is now a disappointing 1.98%, down from 2.20% a year ago and 2.59% two years ago.

As a result of providers cutting rates left, right and centre, every long-term fixed Best Buy deal now offers a return of less than 3.00%, which shows just how important it is for savers to act fast if they want to secure a good deal.

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“Long-term fixed savings rates have officially fallen from grace as a consequence of low interest rates and a lack of appetite among providers for savers’ cash. Providers that offer long-term bonds typically do so to fund longer-term lending, but thanks to Government borrowing initiatives their desire to attract savers has dissipated.

“Savings rates are continuing to plummet as a result and consumers are facing increasingly limited choice when it comes to finding an account that pays a decent return. Last month there were rate cuts of up to 0.44% on five-year fixed bonds and now only 7 deals pay 2.50% or more for new customers, compared with 18 deals a year ago. To put this change into even greater context, before the credit crash savers could get an easy access account that paid an average of 3.75%*, but now not even a seven-year bond pays this kind of return.

“There are, however, other options for savers looking to grow their savings pots: a regular saving account can be an attractive short-term alternative, while interest-paying current accounts offer both great rates and easy access to cash. Savers with a poor-paying account would therefore do well to revisit their savings deal and plan a new course of action.

“Savers are undeniably in a difficult position thanks to rates being so low, especially those who rely on monthly interest to supplement their income. They must therefore try to grab any attractive deals before they become oversubscribed in order to secure the best returns possible.”

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.


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