Grab a fixed savings deal now... rates may already have peaked!
Savers may be wise to grab fixed deals now because rates could have peaked, experts say. In recent months, savers have faced a dilemma over whether to fix or wait for better rates to come along.
But the top rate of 4.65 pc seen last week on popular one-year bonds has vanished, with some accounts on sale for just 24 hours.
and Money Mail can reveal that banks have shelved plans to launch new bestbuy bonds because interest rates are not expected to rise as high as once forecast.
at the start of this month, the Bank of england base rate was tipped to go as high as 6 pc next year. Banks reacted by pushing short-term bond rates over the 4.6 pc mark for new customers.
But now money market traders expect the base rate to peak at a lower 4.5 pc as inflation is brought under control more quickly than previously thought.
and that has led to a fall in the top payers and a suggestion rates have peaked.
savers should no longer sit around waiting for rates to go up, with one-year bonds offering upwards of 4 pc deemed good value. That’s three times the top rates of around 1.3 pc on offer at the start of the year.
Kevin Mountford, co-founder of savings platform raisin UK, says: ‘ The rises we have seen in fixed-rate bonds have slowed down. Top rates of 4.6 pc or over have all disappeared. If you see a bond paying north of 4 pc for a year, grab it.’
The path of future interest rates fell because the Bank of england expects inflation to fall back from the middle of next year towards the 2 pc target in two years’ time.
It currently stands at a 40-year high of 10.1 pc.
anna Bowes, from savings Champion, says: ‘We could be at the peak on rates. Competition has waned over the last week on shorter-term bonds. But you can still earn around 5 pc on longerterm, five-year bonds.
‘If inflation drops back as the Bank of england suggests, tying up some money at this rate will look like a shrewd move.’ There was a frenzy of activity at the end of last week as providers slashed rates for new savers.
virgin cut its one-year rate from 4 pc to just 3.25 pc. Yesterday, it withdrew it from sale altogether.
Charter savings Bank’s two-year bond at 4.95 pc was on sale for just one day, while the provider scrapped the launch of its oneyear bond at 4.55 pc altogether.
rCI Bank cut its one-year rate from 4.6 pc to 4.2 pc and United Trust’s one-year bond at 4.65 pc was on sale for just 24 hours. Other top rates from secure Trust, Tandem, vanquis, Close Brothers savings and Oxbury banks also disappeared.
Cuts are still coming thick and fast. This morning the one-year bond from savings giant Halifax plummeted from 3.4 pc to 2.8 pc for new savers, while Leeds Bs headed down from 3.75 pc to 3.4 pc.
Now it is competition between providers for savers’ money rather than future rises in interest rates which will drive returns up.
and those top-rate bonds will disappear as soon as the bank or building society has attracted the money they need.
But any increases are unlikely to see rates much higher than they are today.
Kent reliance bucked the trend yesterday by raising its fixed-rate bonds for new savers. Its one-year bond pays a top 4.45 pc, up from a much lower 2.79 pc.
along with Kent reliance’s 4.45 pc, other top one-year fixed rate bonds come from Investec at 4.36 pc, with aldermore, atom and TsB at 4.35 pc.
For 18 months DF Capital pays 4.75 pc.
If you are willing to tie your money up for five years, Tandem offers 5 pc and Ford Money and rCI Bank pay 4.95 pc.
remember, you can’t get your money out of a fixed-rate bond until the end of the term.