The Co-op throws down fixed rate bonds gauntlet

The gauntlet has been thrown down when it comes to fixed rate bonds, with the Co-operative Bank raising its interest rates on their fixed rate savings accounts by a minimum of 0.25 percentage points.

The Co-op’s one-year fix, which was previously available to customers making deposits of £25,000 or less at a rate of 3.21 per cent, has been increased to a new market-busting 3.50 per cent, sending it to the top of the best buy tables. The bank’s two-year and three-year fixes have also increased their yields, growing to 3.75 per cent and 4 per cent respectively, matching rival bank Birmingham Midshires, though the Co-operative Bank requires a £1,000 minimum balance, unlike BM’s £1 minimum.

While the Co-op does not allow customers to open the bonds over the internet, the bank has made forms available online and welcomes customers who wish to open a bond to do so by post, by phone, or in branch.  The bank’s head of savings, Zack Hocking, commented on the new rate changes, declaring them ‘great news for savers,’ as the Co-op bucks the trend of low interest rate savings products other banks have been offering to customers.

Industry experts say the new increased rates of return on its fixed rate bonds could be interpreted as the Co-op attempting to recapture the confidence of the UK banking consumer on the heels of last month’s mortgage rate hike. Experts also point out that even though the bank’s new fixes boast excellent returns, they are still taxable, which means that you could benefit from a better return to invest in a cash ISA for deposits under £5,640, which is the 2012-2013 allowance.

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