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Average five-year Fixed Rate Savings Bond Falls Below 2.00%

Personal_Finance / Saving Bonds Oct 24, 2016 - 03:11 PM GMT

By: MoneyFacts


Long-term fixed rate bonds used to be the premier solution for many savers looking for a decent return on their savings. However, data can reveal the disappointing news that the average five-year fixed bond rate has fallen to a record low, now standing below 2.00%.

Charlotte Nelson, Finance Expert at, said:         

“With over 100 rate cuts to five-year fixed rate bonds since January, it is easy to see why this section of the market has plummeted to another all-time low. This will hit savers used to using their long-term savings to supplement their income hard, particularly as the average rate has fallen by 0.96% in just one year.

“Providers not wanting long-term funds have chosen to drop out of the market, with the number of institutions offering five-year fixed rate bonds falling. Given this lack of competition in the market, it is little wonder why rates have fallen. But customers seeking these deals are now facing not only lower rates, but poor choice as well. 

“Five years ago, savers would have been able to get a rate close to 5.00%. Those savers who opted for a fixed rate back then will be severely shocked to find scarce choice today, as there are only two deals offering 2.00% or more over a five-year fixed term.

“The low interest rate environment looks like it is here to stay for some time, and providers simply do not want to be caught out by paying higher rates than may be necessary in the future. With the added effect of the uncertainty in the economy that we are currently experiencing, it is no wonder that savings rates have dropped to this new low.

“With rates like these, savers must be really wary about locking their funds into a fixed rate bond for any significant amount of time. However, the fact still remains that long-term fixed rates offer savers some of the relatively better rates. Savers will therefore have to weigh up the benefits of these compared to a shorter-term offer while doing their best to weather the current unpredictable environment.” - The Money Search Engine 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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