... but at least it’s good news for savers

SAVERS are flocking back to fixed bonds as rates burst through the 2.5 pc barrier to a seven-year high.

During the pandemic, savers turned their back on bonds and withdrew £21.5 billion as rates plummeted. But the tide is now turning, with £1.5 billion flooding back into these accounts in March and April.

At the start of the year, the best one-year deal was just 1.36 pc. But you can now earn a top 2.6 pc from Atom via its smartphone app and 2.57 pc with Cynergy Bank. This is the highest rate on offer since May 2015, according to data analysts Moneyfacts.

Yet those with fixed deals due to end soon must be on their guard or they could end up locked into accounts paying just 0.1 pc.

Just last week investment firm Hargreaves

Lansdown warned that savers think they are earning a better rate of interest than they really are. When a savings bond matures, some banks and building societies put your cash back in the account from which you originally made the deposit.

Others, including Halifax and Santander, dump it in a lowly easy-access account paying 0.25 pc at best.

But a growing number of providers, including National Savings & Investments (NS&I), automatically reinvest your money in a new fixed-rate bond unless you tell them not to.

You then have a short window to get your money out after which you are stuck with the account until the term ends. Providers will write or send an email to let you know your bond is maturing around three or four weeks before the end date.

NS& I, for example, will reinvest Guaranteed Growth Bonds into its current issues, which pay a miserly 0.1 pc for one year, 0.15 pc for two years, 0.4 pc for three years and just 0.55 pc for five years.

On a one-year bond you will see just £1 interest on each £1,000, while over a twoyear term you’ll get a miserly £3.

By contrast, NS&I pays 0.5 pc on both its Direct Saver and its Income Bonds, both of which give you easy access to your money. Once your money is moved to a new fixed bond you have 30 days to get it out. The only exception is NS&I’s five-year bonds, which you can escape in return for losing 90 days’ worth of interest.

NatWest also gives you 30 days to get your money back free of charge. After this, it will cost you 90 days’ interest or what you have earned so far. The bank currently pays 0.2 pc for one year or 0.25 pc for two.

Others pay better rates of more than 1 pc, but still don’t let you get your money back. Skipton gives you 21 days to get out.

At Coventry BS and Aldermore you get a fortnight to move your funds.

With Yorkshire BS you end up in its Fixed Rate Access Bond and you can withdraw the money during the first month. After that you pay a charge to access your cash.