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While many savers may be reluctant to put their savings into a fixed rate account at the moment, given ongoing speculation of a base rate rise this year, they could be missing out on some decent rates. Especially as, thanks to bond rates improving dramatically since the start of the year, the average returns are now the best seen since 2016.
"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," said Rachel Springall, finance expert at Moneyfacts.co.uk. Indeed, all averages are now at their highest level in more than two years.
Specifically, the average one-year bond stood at 1.34% in March 2016 before decreasing to 1.08% in July last year, while the two-year bond rate stood at 1.55% in April 2016 and the five-year rate was 2.15% in June of that year. As you can see in the table below, these rates haven't quite been matched yet, but they're all quite a bit better than a year ago.
|Average fixed rates||Jul-13||Jul-17||Jan-18||Jul-18|
Those who still don't want to commit for a longer term nonetheless have some new options to consider, as shorter-term bonds have also gotten some positive attention. "In the past week alone, Atom Bank has launched both a three and six-month savings bond, paying 1.29% and 1.79% respectively," Rachel found. "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."
Given the eternal popularity of fixed rate bonds, it seems sensible for challenger banks to be offering short-term fixed options to remain competitive. Therefore, as Rachel said, "it wouldn't be too surprising to see more brands consider deals that offer a fixed rate for less than a year", with challenger banks such as OakNorth already doing exactly that.
"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," Rachel commented. "Five years ago (one year after the Funding for Lending Scheme was launched), the average two-year bond paid 0.29% more."
Whether this means it's better to keep your savings in an easy access savings pot for now and miss out on a decent rate of interest or take the plunge and pick a fixed rate bond is something only a time machine can accurately predict. Why not have a look at both the fixed rate bond charts and the easy access chart, and compare for yourself?
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