Fixed Rate Bonds Market Sees Foreign Banks Stepping Up The Competition

The fixed rate bond market is heating up, as foreign banks introduce competitive deals.

While the average return from a fixed rate bond has fallen by 0.35 per cent since March, competition is about to return to the market with the introduction of new foreign players, according to moneysupermarket.com.

India’s third largest bank, Bank of Baroda has launched a set of new fixed rate bonds on the UK market, joining other Indian banks such as ICICI and the State bank of India.

According to Nina Montagu-Smith, writing in The Sunday Times, the UK’s high street is “set for a new invasion of foreign banks”, not only from Indian banks, but America’s Metro Bank is about to open a UK branch, and private equity firm JC Flowers is in the process of buying into the building society market.

Commenting, head of banking at moneysupermarket.com Kevin Mountford, said: “Although it is not a well know high street name, Bank of Baroda is India’s third largest bank and has been operating in the UK since 1957, although this is the first time they have offered mainstream products.

“With little appetite among traditional UK banks and building societies to attract savers it is good to see new players coming into the market and providing competitive deals for savers.”

He added that savers who are cautious about using a foreign bank after the Icelandic banking crisis trapped savers money in their Icesave accounts, the Bank of Baroda is regulated by the FSA and deposits are offered the same protection as those with UK banks.

© Fair Investment Company Ltd