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Savers benefit from fierce competition

Savers benefit from fierce competition

Category: Savings

Updated: 10/08/2009
First Published: 10/08/2009

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 It is now over 6 months old so the content may be out of date.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 are benefiting from increasing rates at banks and building societies as the competition between providers for customers rages on.

The battle between lenders to entice consumers has always been fierce and, with new competitive deals being launched every day, it shows no signs of easing.

When the Bank of England slashed the base rate of interest to an all time low level of 0.5 per cent back in March, there were just three fixed rate bonds that offered a rate of four per cent or over. Five months on, that number has soared to 104.

While the most marked increases have been on four and five year products – banks and building societies offer the best rates on long term accounts as they tie in customers for lengthy periods of time – the average rate paid on bonds has gone up across the board.

Rates of interest paid on one year fixed rate bonds have increased by 0.37 per cent, from 2.78 per cent to 3.15 per cent since March, while two year bonds now pay an average of 3.64 per cent, compared to 2.83 per cent – an improvement of 0.81 per cent.

Three year fixed rate deals have seen a similar rise, with average rates increasing by 0.86 per cent, from 2.98 per cent to 3.84 per cent.

The biggest increases are in the four and five year fixed rates, which have risen from 2.89 per cent to 4.12 per cent (up 1.23 per cent) and 2.86 per cent to 4.38 per cent (up 1.52 per cent) respectively.

"Continuing volatility in the money markets is seeing providers increasingly having to use their savings books towards funding their lending activities," Michelle Slade, spokesperson for Moneyfacts.co.uk, commented.

"Savers are seeing increased levels of choice for their money, but they need to take the time to make sure the product they select is suitable for their needs.

"Many bonds offer no access during the term, so if a saver's circumstances change and they need to access the funds, they may be unable to do so."

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 Any products featured may be withdrawn by their provider or changed at any time.

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