Fixed rate bonds snapped up by investors Go compare with our comparison table

Fixed rate bonds snapped up by investors

08 December 2009 / by Andy Davies

Fixed rate bonds have continued to prove popular with investors over the festive season with many products becoming fully subscribed in a matter of days, Moneynet.co.uk has revealed.

In the past ten days, Moneynet.co.uk has found that deals such as Melton Mowbray's One Year Christmas Bond, offering a competitive rate of four per cent, only lasted three days.

Other fixed rate bonds with a short shelf life include Principality's two year bond, which offered a fixed rate of 4.25 per cent, while Skipton's five year bond, offering investors 5.16 per cent interest, lasted less than a week.

Commenting, Andrew Hagger, spokesman for Moneynet.co.uk, expects demand for fixed rate bonds to show no signs of easing as the New Year approaches, suggesting that as investors come to the end of their current deals, they will now looking for a replacement.

But he warned potential investors that while fixed rate bonds still offer competitive rates, they are not at the high levels seen last year.

"Savers who fixed their interest rate 12 months ago could be coming off deals as high as 5.75 per cent taken out with ICICI Bank UK and Anglo Irish Bank and many of those who locked in for two years in December 2007 will be waving goodbye to a six per cent plus rate or more, with the likes of Halifax paying as high as 6.45 per cent back then.

"Someone with a £20,000 balance will have received £1150 in interest (gross) on 5.75 per cent from a year ago, whereas the best 1 year deal today with State Bank of India at 3.75 per cent will net them £400 less at £750 before tax," he said.

However, while interest rates have been cut in the past year, Mr Hagger added: "The market is particularly competitive over the one and two year terms where there is no shortage of overseas and more niche players looking for a slice of the action."

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ProviderPlan NameCounterpartyISA OptionTermMaximum Potential ReturnMore Info
FTSE 100 Enhanced Kick Out PlanInvestec Bank plcyesUp to
6 years

9.5%

per annum

More Info >
Structured investment plan with the potential to mature after years 1, 2, 3, 4, 5 or 6. If the plan matures early it will return 9.5% times the number of years the plan has been in force. Also available for Stocks & Shares ISA and ISA transfer.
* Maximum Potential Return - Returns are not guaranteed and subject to certain conditions 

Structured investment plans are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. Income and growth returns are not guaranteed. There is a risk of losing some or all of your initial investment due to the performance of the underlying Index or commodity. There is also a risk that the company backing the plan known as the Counterparty may be unable to repay your initial investment and any returns stated.