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Savings Interest Rates Surge as Fixed Bonds Hit a Two-year High

Personal_Finance / Savings Accounts Jul 17, 2018 - 04:45 PM GMT

By: MoneyFacts

Personal_Finance

Savers looking to lock their cash away either over the shorter or longer term will find that average fixed bond rates have improved dramatically since the start of the year, and in fact are now the best since 2016, according to the latest research by Moneyfacts.co.uk.

Some providers have even branched into alternative areas of the fixed bond market in recent weeks, increasing the choice of deals for savers looking for a shorter-term alternative.



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

“Savers who gambled their chances and put off investing in a fixed bond at the start of 2018 may well feel delighted to have trusted their gut, because fixed bond rates have climbed to their highest levels seen all year. In fact, average rates for all terms have hit the highest levels in more than two years, with the average one-year, two-year and five-year bonds having paid 1.34% (March), 1.55% (April) and 2.15% (June) respectively in 2016.

“While all this is a positive step in the right direction, the savings market overall still hasn’t bounced back fully from the effects of Government lending initiatives. Five years ago (one year after the Funding for Lending Scheme was launched), the average two-year bond paid 0.29% more. This means that savers with a £10,000 investment would be taking home £58.99 less today on a two-year bond after it matures, based on the average return in 2013*.

“Despite there still being more room for improvement, it’s encouraging to see certain savings providers branching into other areas of the fixed bond market to spike competition. In the past week alone, Atom Bank has launched both a three and six-month savings bond paying annual rates of 1.29% and 1.79% respectively. These deals sit at the top of the market, so any saver looking for a more inflated rate over the short term compared to easy access or notice accounts may find these tempting.

“Fixed bonds are already a popular choice with savers, and as they brace for a potential base rate rise before the year is out, it is likely they are eyeing up the shorter-term market. It therefore seems a sensible decision for challengers to offer short-term fixed bonds, particularly if other areas have become saturated, so it wouldn’t be too surprising to see more brands consider deals that offer a fixed rate for less than a year. Indeed, there are already decent returns on offer in this area from other brands, such as OakNorth.

“However, as savers may well know, not every Best Buy is accessible to those who don’t go online, or in the case of Atom Bank, are accessible only by mobile app. This means that savers will need to get themselves online to have the best chances of securing the highest rates on offer.”

*£10,000 deposit with 1.55% annual interest earns £312.40 after two years, but on 1.84% the return would be £371.39. Figures are based on the average two-year fixed rate bond for 2018 versus 2013.

moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, there is no commercial influence on the way moneyfacts.co.uk ranks products, showing consumers a true picture of the best products based on the criteria they select. The site also provides informative guides and covers the latest consumer finance news, as well as offering a weekly newsletter.

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