Fixed rate bonds bouncing back, says moneysupermarket

19 March 2009 / by Rachael Stiles
After suffering a decline, the rates offered on fixed rate bonds are now "starting to bounce back," according to analysis from moneysupermarket.com.

Consecutive monthly cuts in the base rate since October last year have left savers reeling as the rates on their savings accounts and investments have dwindled, but there is light at the end of the tunnel, the comparison website has said.

Despite the Bank of England base rate languishing at a record low of 0.5 per cent, and savings returns still nowhere near what they have been in recent years, the top five fixed rate bonds have risen this month and are now averaging 3.89 per cent, moneysupermarket's analysis of the market shows.

"Savers haven't had much to be cheerful about of late, but some green shoots could now be emerging," said Kevin Mountford, head of banking at moneysupermarket.com. "While the leading rates are far from last summer's giddy heights of seven per cent or more, providers are showing they are keen to draw in deposits to shore up their books."

Returns on fixed rate bonds have thus far continued to fall in the first few months of 2009, but have levelled off and increased slightly in March, even though the Bank of England's Monetary Policy Committee cut the base rate again this month.

The only time in last year when there was more disparity between the base rate and the best deal on one year fixed rate bonds and two year fixed rate bonds was in November.

And since the Treasury increased the level of consumer savings protected by the Government to £50,000 last year, savers are turning their attention to interest rates rather than concentrating on security, Mr Mountford added.

There are some competitive market-leading deals available, he said, such as the ICICI two year fixed rate bond, offering 4.10 per cent, and he expects other savings providers "to follow suit in the coming weeks."

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