All's not quiet on the savings front

Published:

12/05/2009

Topic:

Press Release,Savings

The Bank of England base rate may be entering a period of stability, but that doesn't mean all is quiet on the savings front. In fact, it's anything but. Competition in the fixed rate bond market is as fierce as ever.

Savers who can afford to lock their money away for a year or two, can use bonds as a way to beat the current low interest rate environment. Someone who invested £10,000 in the ICICI HiSAVE two-year Fixed Rate Account, which is paying 4.35 per cent, would earn £435 in interest over a year, compared to just £15 in an account paying 0.15 per cent (the average rate of interest on instant access accounts according to the Bank of England.)

Kevin Mountford, head of banking at moneysupermarket.com, said; "Competition in the fixed rate bond market is really heating up, and savers looking to invest a lump sum for a fixed period can take advantage of some great rates.

"The low interest rate environment has hit savers hard. With the base rate at 0.5 per cent, and many savings accounts paying less than that, many people are questioning whether there's any point in saving at the moment. However, there is a greater need than ever to ensure you are getting the best return possible on your money. With rates of 4.0 per cent-plus available you can literally boost the amount of interest you earn by hundreds of pounds a year by moving your savings into one of the highest-paying accounts.

"That said, if you are locking into a fixed rate account you do need to be a bit careful. The leading fixed rates currently have terms of between three and five years. But the danger of locking your money away for this long is that you could find yourself stuck on an uncompetitive rate when interest rates start to rise again. With the base rate at an all-time low, savers should only be looking to fix their savings rate for a year or two."

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