Fixed rate bonds and saving market 'recovering from recession'
UK savers were badly hit in the worst of the recession, as base rates continued to fall to their lowest level in history ' 0.5%, the rate at which they still remain, marking the sixth month in a row.
This caused the UK savings market to crash, forcing those that once lived off their interest returns to to dip into their capital.
However, the low rates mean that home-owners with tracker mortgages would have seen repayments plummet, leaving them with more disposable income.
Although the Bank of England base rate remains at a record low, the savings account market has been kick-started, allowing savers to earn up to 5% - 10 X the current base rate, depending on the savings product they choose.
Barnsley Building Society recently launched a new range of fixed rate bonds, offering rates of up to 5% on its 4 year fixed rate bond on balances between £100 and £500,000. Alternatively you can choose the Barnsley fixed rate bond with a 3 year term offering 4.15%, 2 years at 4% and 1 year at 3.15%.
It may be wise to cap your investments at £50,000 per banking institution, as this is the amount covered by the Financial Services Compensation Scheme. If you have more than £50K to invest and want to ensure your funds fully protected, Halifax is also offering 5% on its 1 year fixed rate bond, so you could spread your savings across the two. The difference with this accout is that it limits the amount you can deposit per month from £100 to £500, so this account may be more suited to somebody that is looking to build up savings, rather than investing an existing nest-egg.
The savings market has also seen an increase in rates on instant access savings accounts, with rates of up to 3.20% and no penalties for withdrawing, so you are free to move your savings around and still benefit from high rates.
If you wish to make use of your Individual Savings Account (ISA) allowance you may be interested to hear that the chancellor, Alistair Darling recently announced that the overall tax-free ISA allowance is to rise from £7,200 to £10,200, with the Cash ISA allowance element increasing from £3,600, to £5,100.
This will come into effect from next month for savers aged 50 and over and from April next year for everybody else.
Halifax is currently leading the ISA market, with its range of fixed rate ISAs, offering rates between 2.40% and 3.75% from terms ranging between 1 - 3 years. To open an account with the Halifax ISA range you must invest between £500 and £3,600, and if you are looking to switch accounts from an existing ISA provider, it offers an account paying 2.60% on balances of £10,000.
