Long-term deals leaving savers short-changed

SAVERS wanting to tie up their money f or a better rate of interest are being short-changed, new research reveals.

On some fixed-rate deals, the rates on offer are less than you can earn on an easy- access account. The gap between what you are paid on fixed-rate deals where you tie up your money for a year or more and that on easy access accounts has narrowed.

The average rate on fixed-rate deals fell last year by more than 25 pc to 1.6 pc after tax (2 pc before tax), figures from First Direct show.

In 2010 it was a higher 2.2 pc (2.75 pc). But the rate you can earn by leaving your money in an instant access account in the second half of last year was at its highest for more than two years. Even though the Bank of England base rate has not moved.

The trend is set to continue this year as banks and building societies cut the rates they are willing to pay savers who are prepared to tie up their money.

At the start of the year you could earn up to 3.56 pc (4.45 pc) if you were willing to tie up your money for three years. Now the top rate is 3.2 pc (4 pc).

There were plenty of one-year deals at 2.8 pc (3.5 pc) or 2.88 pc (3.6 pc) at the start of the year — now they are few and far between.

But the rates on offer from big banks are even lower. At Lloyds TSB you will earn just 1.6 pc (2 pc) in its one-year fixed-rate bond — and during that term you can’t touch your money. Barclays and HSBC pay the same miserly rate. At Halifax, the rate is 1.8 pc (2.25 pc). On two-year fixedrate bonds you can earn a paltry 2.16 pc (2.7 pc) with Lloyds or 1.76 pc ( 2.2 pc) with HSBC. The banks’ oneyear fixed-rate deals look extremely poor value. They are less than you can earn on an easy-access account — even if you want to stick to a branch-based account where rates are generally lower.

The top rate in the High Street comes from Virgin Money Easy Access Saver at 2.28 pc (2.85 pc) on sale through Northern Rock.

Or you can go for Triple Access from Yorkshire, Chelsea and Barnsley BS or Skipton My Savings account, all at 1.8 pc (2.25 pc).

But you might have to run the Yorkshire, Chelsea and Barnsley accounts in tandem with another easy-access account — you are limited to three withdrawals a year from them.

The top internet rate comes from Santander with its esaver account paying 2.48 pc (3.1 pc), including a bonus for the first year you are in the account.

You can earn 2.4 pc (3 pc) with Allied Irish Bank (GB) Savings Direct Reward Account or 2 pc (2.5 pc) with its Easy Access Issue 3 account.

With the first account you are limited to four withdrawals a year; with the second you can make as many as you want.

Smaller banks and building societies pay better rates on fixed-rate deals.