Fix to get top rates

With Bank of England Base Rate at an all time low, many savers have well founded worries about the level of returns they can expect on their hard earned savings. If this predicament rings true, fixed rate savings accounts are certainly worth thinking about, as they offer customers a guaranteed rate of interest and most pay rates higher than their variable rate counterparts. However, most do not allow access during the term which is typically between one and five years, so knowing how much money can be set aside is vital.

The financial woes that have dominated the social and business landscapes since late summer in 2007 have meant that many banks and building societies are worried about lending money to each other. Instead of turning to the money markets, many are funding much more of their lending activity through their savings book. In a role reversal of sorts, borrowers are currently receiving bad news with rising mortgage rates, while savers are benefiting from increasing rates in order to attract our money.

Savers keen to invest their ISA allowance can certainly enjoy a competitive rate of interest. Leeds Building Society have a Five Year Fixed Rate ISA at 4.05% and savers can access 25% of their money penalty free. Halifax is also paying 4.00% on its Fixed Rate ISA Bond with a 4 year term.

Those that don’t have a lump sum to invest can still benefit from fixed rates. Many regular saver accounts offer a fixed rate of interest, typically over a year if a regular amount is invested each month. Top rates on the market include Barclays Bank, which is paying 4.17% on its Monthly Savings account, provided savers invest between £20 and £250 each month. Rates on regular saver accounts are higher than standard savings accounts, but the restriction on how much can be invested means that returns are only paid on relatively modest balances.

If money is there to invest then fixed rate investments continue to pay the highest rates on the market, but savers need to act fast. In June 2008 the average fixed rate bond was around for 95 days; today the top deals are unlikely to stick about for much more than a month, with the average just 37 days.

With the pressure to attract business more important for our financial institutions than ever before, banks and building societies are likely to continue to rely on in-house methods to raise funding, rather than external sources, which has to be considered good news for savers. Those that are unable to compete with offering such high fixed rate accounts are looking to attract savers’ money through higher rates on variable rate accounts. If the ongoing battle to entice savers continues, we may see rates increase even further.