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Derin Clark

Derin Clark

Online Reporter
Published: 04/11/2021

Rising fixed bond rates could be driving more savers to consider locking their money into a fixed account, as recently published data has found that the number of people searching for a fixed rate bond has more than doubled in six months.

The data, which came from Moneyfacts Savings Analyser, found that in September 49.83% of people were searching for a fixed rate bond, which compares to 28.42% looking in March.

Meanwhile, average rates on fixed rate bonds have also been rising. For example, the average rate on a one year fixed rate bond stood at 0.44% in March, which has increased to 0.69% in September and has risen again to stand at 0.79% this month. The average rate on a two year fixed bond was 0.51% in March, rising to 0.77% in September and 0.87% this month. Similarly, the average five year bond rate stood at 0.84% in March, increasing to 1.17% and rising again to 1.31% this month.

“It’s promising to see more savers are interested in fixed rate bonds as rates have been on an upward trajectory since the summer,” said Derek Sprawling, savings director at Paragon Bank. “One of the key influencing factors of this trend will likely be the cohort of customers who took out a one-year fixed rate bond after NS&I announced its rate reduction last autumn, with those funds now coming to maturity. Those customers will likely be interested in fixed rate products and will have a propensity to shop around for the best rates.”

What are the best fixed rate bonds rates?

Savers looking to lock their money into a fixed rate bond will have to opt for a challenger bank as no high street bank or building society currently tops the fixed bond charts. Al Rayan Bank currently pays the top one and two fixed bond rates paying an expect profit rate of 1.45% AER and 1.76% AER respectively on its Fixed Term Deposit accounts. Meanwhile, the top three year fixed bond rate is paid on accounts from JN Bank and Al Rayan Bank, with JN Bank paying 1.81% AER on its Fixed Term Savings Account and Al Rayan Bank paying an expected profit rate of 1.81% AER on its Fixed Term Deposit account. Savers looking for a five year fixed bond will find that the top rate comes from Gatehouse Bank, which pays an expected profit rate of 2.05% AER on its 5 Year Fixed Term Woodland Saver.

How will inflation impact savers?

Savers should keep in mind that inflation is expected to keep rising over the coming months, with the Bank of England forecast showing that it may reach 5% next year. If so, savers may continue to struggle to find any long term bonds that match the rate of inflation, eroding the value of their savings.

An option for long term savers concerned about rising inflation could be to opt to invest their money instead. Investing, however, is a much riskier alternative to depositing money into a savings account as it can result in the investor not making any returns on their investment or, in some cases, can result to them losing all their money. Due to the risky nature of investing, those considering this option should carefully research the market and may want to speak to an independent financial advisor before making a decision. More information about investing can be found on our how to invest page.


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