Fixed rate bond rates rise

29 June 2009 / by Rebecca Sargent
Fixed rate bond rates have begun to creep up, analysis from moneyfacts.co.uk has revealed.

The long awaited incline in fixed rate bond rates has seen the interest rate on a five year fixed rate bond soar by 1.13 per cent between March and now, bringing the average rate to 3.99 per cent, while the average one year fix now stands at 3.09 per cent, an increase of 0.31 per cent since March.

According to Moneyfacts, at the beginning of March there were three fixed rate bonds offering rates of more than four per cent, but now there are 124 that fall into that category.

Commenting, Michelle Slade, analyst at Moneyfacts.co.uk said: "Volatility in the money markets is prompting providers to turn to their savings book to fund their lending activities."

According to Ms Slade, Clydesdale Bank and Yorkshire Bank are currently leading the way with a five per cent interest rate on a five year fixed rate bond. However, she says:

"In this low interest rate environment that is an extremely competitive rate of return, but savers need to balance this return against expected rate rises in future years.

"When you think that no one will go any higher, someone else launches a new bond paying an increased rate. There doesn't seem to be any limit to how high the providers are prepared to go," she added.

Meanwhile, the cost of fixed rate mortgages has increased, Ms Slade added: "While this is bad news for borrowers, savers are receiving a welcome boost after months of watching the interest rate on their money plummet."

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