Salvation for savers as bond rates hit year high - Savings - News - Moneyfacts

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Salvation for savers as bond rates hit year high

Salvation for savers as bond rates hit year high

Category: Savings

Updated: 04/04/2011
First Published: 04/04/2011

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 It is now over 6 months old so the content may be out of date.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 have been given a huge boost after research from Moneyfacts.co.uk revealed the rates available on short term fixed rate bonds have hit their highest level in over a year.

Despite having fallen to an all-time low of 2.52% in August 2010, the average rate on one year bonds has been steadily rising ever since, and now stands at 2.85%, the highest level seen since March 2010.

Two year bonds are also at a 13 month high having reached an average of 3.42%, while three year bonds are at their best level since April last year at 3.70%.

For savers who prefer to look over the longer term, five year bonds currently pay an average of 4.17%, the highest rate since June 2010.

Michelle Slade, spokesperson for Moneyfacts.co.uk, said most of the best deals are from smaller building societies.

  • Principality Building Society currently offers the leading deals over three and five years, paying a rate of 4.26% and 5.01% respectively.
  • Cheshire Building Society heads the two year market with a rate of 3.95%.
  • AA outshines all others in terms of short term deals, with a one year fixed rate bond paying 3.40%.

"The biggest increase in rates is on short-term deals, which are the most popular amongst savers," added Ms Slade.

"But if savers want to make the most of their money, they may need to look further afield than their local high street."

Explaining the recent improvement in rates, Ms Slade said savers' money is still in high demand amongst providers, while the markets expect a rise in base rate in the not too distant future.

However, in a warning to tempted savers, Ms Slade said most fixed rate bonds do not allow access to the invested money during the term of the deal, and if they do, there is usually a hefty penalty for doing so.

"Before committing funds savers need to ensure they won't need access to their money.

"If savers want to benefit from rate rises as they happen and/or wish to maintain access to their money then they may be better off opting for a variable rate account.

"Rates on variable rate accounts have also been rising, albeit at a slower speed than fixed rate bonds."

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