Is it time to lock in a fixed bond account? Rates climb to 1.35%
Is it time to lock in a fixed bond account? Rates climb 1.35% as banks fight for your money
A fixed rate bond frenzy among banks vying for our money pushed rates up to 1.35% for a year.
That’s more than double what was offered in April, when rates were at their lowest, and twice the amount of interest paid by the best easy-to-access accounts. Experts say savers should consider locking in to avoid missing out.
There have been 400 rate hikes since the start of last month as banks vie to dominate the best buy tables, according to research from the Savings Champion website.
Better deals: Fixed rate bonds soared to 1.35% in one year, more than double what was offered in April
Last week, the pace picked up when rates broke the 1.3% mark for those who tie their money up for 12 months.
Meanwhile, the number of one-year bonds offered climbed by a fifth to 163, from 134 earlier this year.
Rachel Springall, Moneyfacts Financial Expert, says: “Banks have gone above and beyond to offer the best one-year bonds. Rates could rise further, but savers risk missing out if they wait and see.
Savers had turned their backs on fixed-rate bonds after the drop in rates.
Around £ 7.9bn has gone out of accounts so far this year, while £ 189bn has gone into easy-to-access accounts.
A year ago, the best one-year bond with Paragon Bank was yielding 1.2%. But in April, the best offer paid only half at 0.6%.
However, since the start of the summer vacation, rates are on the rise again.
Last week, Tandem Bank launched a one-year bond at 1.31%, but it didn’t hold onto the top buy for long. Investec raised its rate to 1.33%, its second hike this month.
Allica Bank won a few hours later with 1.35%. Tandem Bank quickly followed by increasing its rate to 1.35%. Yesterday, Allica raised its rate again to 1.38% while the Tandem rate rose again to 1.37%.
Some banks, including OakNorth, Allica, Tandem and Investec, have raised rates twice or more since the start of this month, when rates stood at 1% at best for a year.
Last week, United Trust Bank hiked rates twice in 24 hours to pay 1.25% for one year and 1.3% for 15 months.
The best two-year rate came out yesterday at 1.66% Allica Bank, topping Tandem’s 1.57%.
But many savers will wonder if they shouldn’t be locking in their cash in case rates rise further.
James Blower, founder of the consultancy firm Savings Guru, says: “There is competition for our liquidity from the banks.
“They want to encourage savers to move away from easy-to-access accounts, so they have to pay for it. It is difficult to predict whether they will go higher. But I would be surprised if they went up to 1.5% for a year. ‘
Kevin Mountford, co-founder of the Raisin UK savings platform, says: “Banks have to raise money and rates change daily.
“Take these rates while you can. “
Whatever savers do, they should ditch the big banks, which only pay 0.15% on their one-year bonds at best.
They don’t have to compete as hard for money, as savers tend to use their checking account provider as a home for their savings. Their rates for easy-to-access accounts are as low as 0.01 percent.
Savers have the same level of protection with small banks as with large players. The Financial Services Compensation Scheme covers amounts of up to £ 85,000 per person if the bank runs into problems.