Thousands of savers face fixed-rate crashPosted on: 13 July 2009 by Gareth Hargreaves
Savers with £22bn tied up in fixed-rate bank and building society accounts maturing in the next six months need to move their money as soon as their terms mature.
And they must prepare themselves for sharp falls in income. Someone with a bond maturing now will see their returns fall by more than half if they sign up for a new bond with the same provider.
A year ago, banks and building societies paid more than 7% before tax. But those same providers might no longer pay top rates.
For example, last year Nationwide paid 5.6% after tax (7% before tax) on its one-year fixed- rate bond available over the internet.
Today, it's paying just 2.4% (3%) for savers wanting to fix for a year. After tax, this will cut your income from £560 to £240 on each £10,000 in your account, a drop of 63%.
Derbyshire Building Society paid 5.61% (7.01%) this time last year to savers willing to tie up their money for a year. Today, it's 3% (3.75%).
West Bromwich paid an even higher 5.68% (7.05%), which is down to 2.6% (3.25%).
If you fail to tell a bank or building society where you want to move your money once it comes to the end of the fixed-rate term, some will move it themselves into a maturity account, where the rate can be as low as 0.08% after tax (0.1% before tax).
Top one-year bonds now pay 3% (3.75%), but if you are willing to tie up your money for up to 24 months, the rates are even better. Over 18 months, you can earn 3.2% (4%) or up to 3.6% (4.5%) for two years.
Some fixed-rate bonds now pay less than top easy access accounts. You can earn more than 2.4% (3%) in an easy access account where you can dip into your money or add to it at any time.
But on the less flexible National Savings & Investments Guaranteed Growth Bond issue 47, where you agree not to touch your money for 12 months, you earn only 0.8% (1%).
Share with friends
- Food & Drink
- Home & Lifestyle
- What's on
Related GroupsSee All
Related Blog Posts
22 Aug 2016Know Before you Go: Tips for a Safe a...
20 Aug 201616 Best Financial Management Certific...
16 Aug 2016What You Need To Know About the Cooli...