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Fixed rate savers reap interest returns

Fixed rate savers reap interest returns

Category: Savings

Updated: 17/02/2011
First Published: 17/02/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Savers who opt for an easy access account ahead of a fixed rate account are missing out on an average of £629 million in interest each year, new research has revealed.

Analysis of data from the past ten years by first direct found that fixed rate deals have offered better returns than the variable rate products on offer during the same period.

On average, the decision not to fix will have cost a saver £78.50 in interest per savings account.

Unsurprisingly, the year that base rate first slumped to its record low of 0.5% was the worst for variable rate savers when compared to returns on fixed rates.

In 2008, the average interest rate with a one year fixed rate bond was 5%, while instant access rates slipped over the course of the year from 2.77% in January to 0.49% by December.

With nine million variable rate savings accounts being opened in 2008, with an average balance of £2,932, the total interest lost that year was £835.4 million, the equivalent of £92.78 per account.

However, the worst returns for instant access savers were in 2009 and 2010, when average interest rates varied month on month between 0.16% and 0.23%.

"Savers often face the dilemma as to whether they should fix their savings or choose a variable rate," said Richard Brown, senior savings product manager at first direct.

"This historical analysis shows that fixed rate pricing over the past decade has consistently offered better returns when compared to both instant access and notice accounts."

However, with the base rate seemingly set to go up in the near future, Mr Brown said the key to deciding whether to fix or opt for an easy access account is working out when that change will come.

"There are clear advantages to opting for a fixed rate including a guaranteed return at the end of the term; however, easy access accounts do have their own advantages in offering ready access to your money and the option to move it at short notice.

"As a general rule it is advisable to have a mixture of savings in accounts that can be easily accessed in addition to having some that you are able to tie up for longer periods."

Whether you're searching for a fixed rate or a variable rate account, Moneyfacts.co.uk has all the answers to solve your savings conundrum in our savings best buy charts.

Find the best savings rates for you - Compare savings accounts


Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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