Banking News Fixed Rate Bonds To Fix Or Not To Fix 3319

Fixed rate bonds: To fix or not to fix?

14 May 2009 / by Rebecca Sargent
Competition in the fixed rate bond market is returning, but should savers fix now, and for how long?

Commenting, chartered financial planner at Fairinvestment.co.uk, Sharon Bratley said: “Savers have been hit hard by the credit crunch as interest rates dropped to record lows, and as they remain at record lows, it is encouraging that fixed rate bonds are offering such high rates in comparison.

“A rate of 4% is eight times the Bank of England’s base rate, and when savers and pensioners have seen their income from savings fall through the floor over the last twelve months, the rates may seem too good to be true,” she added.

So should people fix now?

Mrs Bratley says: “It is going to take quite some time for interest rates to reach the heights they were once at, and people have to remember that rates above four per cent are exceptional given the fact that the current base rate is so low.

“However, to be safe it may be worth opting for a shorter term fixed rate bond at the sacrifice of a higher interest rate – you can still get comparatively high interest rates for two and three year fixed rate bonds.

“The most important thing for savers to do though is to shop around to make sure they are getting the best deal for their circumstances – four per cent may be high now, but that may not be the case in five years time.”

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Written by Editorial Team