Long-term savings rates on the declineFixed-rate deals now less attractive
11 August 2011
New Moneyfacts research shows that average savings rates for long-term fixed-rate bonds have declined over the last 12 months.
While average rates are broadly the same as they were two years ago, there has generally been a decline since last year's peak. The average rate for three-year bonds has fallen from 3.50% to 3.43%, four-year bonds from 4.05% to 3.86% and five-year deals from 4.02% to 3.74%.
There is some better news for savers in that the average for one-year deals has risen from 2.52% to 2.82% and from 3.13% to 3.35% for two-year bonds.
Long-term savers affected
Louise Holmes, spokesperson for Moneyfacts.co.uk, commented: 'A number of providers have reduced and withdrawn their fixed-rate savings bonds recently, bringing average rates down. Whilst the short-term market has remained relatively unscathed, long-term bonds which typically pay the higher rates, have been hit particularly hard.
'Providers appear to be funding their mortgage lending pots via the currently low money markets, rather than through their savings products. Whilst this is potentially good news for borrowers, savers are paying the price by receiving disappointing returns on their investments.'
Silver lining with short-term deals
Paul Davies, savings expert at Which?, said of the research: 'While the trend on three-, four- and five-year deals is downwards, and significantly downwards, there is some consolation in the rise in average one- and two-year fixed-rate bonds.
'Some savers are already questioning the sense in locking away their money for a long period anyway, given less attractive rates and the feeling that interest rates will rise eventually.
'If you do want to take out a fixed-rate savings product, then make sure that you check our daily-updated Best Rates for the most attractive deals.'
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