Short-term fixed bonds have burst through the 2 per cent barrier for the first time in nearly two-and-a-half years.
A frenzy of rate rises came last week as new banks began competing in earnest for savers’ money.
On Thursday, Charter Savings Bank increased the rate on its one-year fixed-rate bond to 2.05 per cent.
New deals: A frenzy of rate rises arrived last week as new banks began competing in earnest for savers’ money
Kent Reliance brought in a 2.05 per cent deal a day later, while on Monday Investec upped its rate from 1.9 per cent to 2.05 per cent.
Yesterday Close Brothers and Oxbury banks followed suit to pay 2.05 per cent. Cynergy Bank has also gone up to 2 per cent, followed closely by Shawbrook Bank at 1.96 per cent.
Other providers have joined in, bringing the average rate to 1.06 per cent, up from 0.89 per cent last month, according to data analysts Moneyfacts. This is the largest monthly increase for more than a decade.
The new 2.05 per cent rate is well above the top easy-access deals of 1.2 per cent from Zopa and 1 per cent with Goldman Sachs’ Marcus.
James Blower from website Savings Guru says: ‘The gap between easy access and fixed-rate bonds is almost double, which is enough to justify locking in for a year.
‘I wouldn’t look at fixing beyond 12 months. It is certainly a buoyant market for savers, and I can see very few reasons why it won’t continue to tick upwards in the coming months.’
Although rates could rise further, all the time savers wait for better deals and stick to easy-access accounts they are losing out on interest. I
f you do opt for a fixed-rate bond, avoid the big banks. They continue to pay a pittance and you can earn eight times as much interest elsewhere.
This is because big High Street lenders are awash with cash, while smaller firms are keen to attract savers’ money to finance their lending.
The big banks have passed on little of the 0.65-point rise in base rate since December. Barclays, for example, has increased its one-year bond by just 0.15 points to offer a miserly 0.3 per cent.
