Savers hunt for best deals, turn to fixed rate bonds

While savers in search of the best deals have been turning to fixed rate bonds in ever increasing numbers, new research from a major provider of personal and business bank accounts has found that the rates on even the best savers are not keeping up with the rising cost of living.

Halifax‘s new research has said that, in light of the current inflation rate, measured at 3.7 per cent by the Retail Prices index, a basic-rate taxpayer needs to find a 4.62 per cent interest rate savings product to merely brake even after the erosive effect of inflation is taken into account.  Meanwhile, Chancellor Osborne has dashed the hopes of many savers by discounting the possibility that the Bank of England’s base rate would increase anytime in the immediate future.

The high threshold set by the inflation rate for savers to meet before seeing any real returns to their cash is much too high for the nation’s savings providers, with hardly any fixed-rate deals existing that can come even close to offering savers any peace of mind.  Most offerings from high street banking institutions lag well behind, such as the Santander-owned Cahoot, an online banking service that offers just 3.65 per cent before taxes on its one-year fix.

Meanwhile, the rest of the nation’s banks and building societies lag behind, with Leeds Building Society’s 3.25 per cent offering the best available – provided a saver deposits at least £10,000 into the account.  Santander’s non-internet offering also returns the same rate, but requires a massive £25,000 deposit instead.

Two year deals are slightly improved, but still insufficient, with 4 per cent before taxes offered from Investec Bank or a 3.9 per cent return from Sainsbury’s Bank.

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