UK Long-term Fixed Savings Bond Interest Rates RisePersonal_Finance / Saving Bonds Feb 20, 2017 - 10:22 AM GMT
Moneyfacts UK Savings Trends Treasury Report data, yet to be published, highlights that the average long-term fixed bond rate has increased by 0.05% to 1.30%, the first time Moneyfacts has seen a significant rate rise of 0.05% or more since October 2015.
Charlotte Nelson, Finance Expert at Moneyfacts, said:
“The increase to the average long-term fixed rate represents a small but fundamental shift in the market. After reaching record lows last year, savings rates in the long-term fixed bond market are at last seeing a boost again. The 0.05% increase may appear small, but savers who have been waiting since October 2015 for a significant upturn in rates will be glad to see a seedling of hope.
“The increased presence of challenger banks has been driving the boost in the average rate, with rate increases and launches outweighing cuts for the first time in 15 months. These banks are still relative newcomers and so with no brand name as such to trade off the best way to get savers’ attention is to offer the best rates. These banks need to continue to remain competitive, as when a tranche of bonds matures, they do not want a substantial majority of their savings book to go elsewhere. Keeping rates among the Best Buys will ensure that at least some existing customers will opt for another bond with them.
“With many savers waiting for the NS&I three-year fixed bond, expected to be announced in the spring, many of these providers know that they will likely be unable to compete with the predicted rate of 2.20%. Instead, they are choosing to attract customers now to preempt this.
“With these newer brands competing against one another for the top of the Best Buy charts, the savings market is starting to see a micro-market forming, especially as the larger main banks are still reluctant to compete at all. The term funding scheme is likely to only exasperate this further.
“Whilst this is positive news, savers are still battling rising inflation, so they will have to remain vigilant to get the best possible return on their savings.”
The Moneyfacts UK Savings Trends Treasury Report, out later this month, is a comprehensive monthly overview of current and historical data for the savings and investment market, incorporating written commentary alongside graphs and tables highlighting key trends.
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