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."
© Fair Investment Company Ltd
