The outlook for an interest rate rise is increasingly uncertain; fixed rate bonds remain popular as savers look for options that can maximise their savings.

Some of the latest fixed rate bond deals on shorter terms, such as two years, are offering competitive levels of interest for savers reluctant to tie their money up for too long, while a fixed rate bond with more flexibility has also been launched.

Lloyds TSB, which looked at how the Bank of England has changed base rate (currently 0.50 per cent) in the past, said increases of only 0.25 per cent had been made at one point.

Looking at periods since 1997 when rates have increased, Lloyds said four increases took place between May and August 1997 each at 0.25 per cent, with four increases also taking place during the six months from September 1999 to February 2000.

The last time rates were hiked was over the 12 months from August 2006 to July 2007 when there were five Bank Rate rises.

One and two year fixed

One of the leading fixed rate accounts is the 2 Year Fixed Rate Bond from Santander which is paying four per cent gross/AER on deposits from £1.

Not far behind, Birmingham Midshires is offering 3.85 per cent gross/AER on is 2 Year Fixed Rate Bond, and the Post Office has a 2 Year Online Bond available with a rate of 3.80 per cent gross/AER. The minimum deposit for the Post Office is £500.

These two year bonds either do not allow withdrawals or will apply an interest charge if funds are withdrawn during the fixed term.

Longer terms

Some of the highest headline rates are still available on longer term fixed-rate accounts. For savers willing to lock their money away for five years, Birmingham Midshires has a 5 Year Fixed Rate Bond paying 5.05 per cent gross/AER.

Flexibility

Offering a two year bond with a difference, Barclays has launched the 2 Year Flexible Bond which has a rate of 3.20 per cent gross/AER but allows savers to make withdrawals of some of their funds during the fixed term.

The account allows for three separate withdrawals of up to 10 per cent of the original savings. So, if you invested £10,000 in the account you would take out a maximum of £3,000 without incurring any charges.

Head of savings at Barclays, Andy Gray, said: “The vast majority of fixed rate bonds on the market do not offer any flexibility without charge or notice; so, many customers are losing out on good rates of interest because they are reluctant to lock their money away in case they need it.”

No restrictions

If a flexible bond still sounds restrictive, then instant access savings accounts may be the option for you. Two of the most competitive accounts, from Santander and ING Direct, have a rate of three per cent AER.

The Santander e-Saver allows withdrawals without penalties on deposits from £1, with the ING Direct Savings Account also offering instant access to savings and a three per cent rate on savings from £1.

Both of these accounts are variable rate savings, which offer a 12-month bonus, boosting the rate up to three per cent. After the 12 month period the rate will change.

© Fair Investment Company Ltd