🔔 Fixed rate bonds start to tumble

Best buy fixed term bond rates have tumbled recently amid new fears that the Bank of England could drop interest rates.

Nobody likes uncertainty and the savings market is no different – it’s impossible to know just what will happen to interest rates in the short term, never mind over the next few years.

As a result, the market seems to be pricing in lower interest rates. Indicators, such as long-term gilt yields, which at the moment are lower than the current Bank of England base rate, suggest that the Bank of England could cut interest rates, especially in the event of a no-deal Brexit, which would mean that savings rates overall would fall also. And the looming threat of a global recession could also spell yet another tough period for savers.

Best buy competition has started to stall over the last few months and the best rates available have even started to wane more recently, which will be a great disappointment and of concern to long suffering savers.

However, somewhat unhelpfully, the BoE has repeatedly said that rates could move in either direction.

But, as this is unprecedented territory, there is no way to know for sure. And Brexit is not the only economic indicator. The looming spectre of a global recession will also affect the Bank of England’s interest rate decisions.

However, as we’ve seen numerous times before, expectations can change so, even though rates have fallen, savers may want to fix some of their cash to capture the current rates in case interests fall further, whilst keeping some cash on easy access to take advantage of an increase in interest rates and/or competition.

Interest rates have been at very low levels for over five years now, ever since the introduction of the Funding for Lending Scheme in August 2012, so it has never been more important to make your cash work as hard as possible by shopping around for the best rates.

While saving into one of the best easy access accounts doesn’t appear to reap huge rewards, if you were to leave your money in a poor paying account with a high street bank the outcome would be even more dire. The HSBC Flexible Saver is paying just 0.15% gross/AER so on a balance of £50,000, you would earn just £75 in interest over 12 months.

The best easy access account is with Coventry Building Society. The Triple Access Saver is paying 1.46% gross/AER – but as the name suggests, you can make just three penalty free withdrawals per year. The best non restricted easy access account is paying just a fraction less at 1.45% gross/AER – the Cynergy Bank Online Easy Access Account – issue 25*.

If you can tie some of your cash up, rather than leaving it on easy access, you can earn a little more. Although competition has waned recently you can still earn up to 1.80% on a 12 month fixed rate bond with Zenith Bank* or Axis Bank*, both of which can be opened via the Raisin UK Savings Marketplace *. For those happy with a Sharia account, Al Rayan Bank is paying 2.05% Expected Profit Rate for 12 months.

Over two years the best non Sharia account is from Axis Bank* and is paying 1.98% gross/AER, whilst again Al Rayan is paying the best rate - 2.30% Expected Profit Rate per annum.

In fact, you don’t even need to tie your cash up to get similar rates as there are some notice accounts that are paying equally competitive rates. These accounts have not been as affected by the recent downturn in savings rates and Gatehouse Bank is paying 1.82% on a 120 day notice account, while Close Brothers is paying 1.80% but the notice period is just 95 days. And the latter can be opened by post and telephone, for those who prefer not to open their savings accounts online.

For some, the certainty of a fixed rate is important but you certainly wouldn’t want to put all your eggs in one basket – and you don’t need to tie up your cash to beat what the high street banks have to offer.

Keep an eye on our best buy tables to find the best accounts.

*We are occasionally paid by some providers if you click through from our Best Buy Tables and open a savings or current account with them. We will never accept a payment that compromises in any way our independent, whole of market approach to providing information on savings products. For clarity we will indicate those companies who remunerate us with an asterisk (*).