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Fixed rate bonds more popular than easy access accounts

21 September 2009 / by Andy Davies

Fixed rate bonds are proving more popular than easy access savings accounts as savers look to lock away their money.

Research by Moneyfacts.co.uk has revealed that 37 per cent of savers were looking for a fixed rate bond in August, an increase of eight per cent since the start of year, while easy access savings accounts popularity fell by five per cent to 27 per cent.

Commenting, Michelle Slade, spokesperson for Moneyfacts.co.uk, said: "Access to funds appears to have become less important in this low interest rate environment as savers look at alternative options to maximise the returns on their money."

The findings indicate that the highest rates continue to be offered on fixed rate bonds with a five year term as the average rate now stands at 4.61 per cent compared to a one year bond with a rate of 3.11 per cent.

Explaining the difference between the rates, Ms Slade said: "Providers are choosing more than ever before to use their savings book over the money markets to fund their lending activities.

"Savers prepared to lock their money away can find top rates as much as two per cent higher than those available on an easy access account."

However, despite being able to earn more interest with a five year fixed rate bond, 78 per cent of savers said they are looking for bonds with a maximum term of two years.

Ms Slade added: "Savers are concerned that once bank base rate increases, their money will be locked into an account which will be uncompetitive in the future.

"Those providers that really want to tempt savers money are offering top rates for a one or two year commitment."

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