Banks have begun to plunder the rates on their fixed rate bonds in order to shift the focus to their ISA offerings ahead of the April deadline, experts say.
Savers with bonds maturing this winter have been left in a bind by their personal and business bank account providers, as they would have no choice to take out a new bond with an interest rate as much as 25 per cent less than the one they just brought to term. The reasoning behind banks’ abandonment of fixed-rate bond savers is that ISA competition always hots up just before the end of the tax year in early April as providers try to drive last-minute ISA customers keen to spend their remaining allowances before the deadline.
Many lenders have slashed rates in the run up to the deadline, with Clydesdale and Yorkshire banks reducing their three-year and five-year fixes by 0.2 percentage points and losing their best buy status in both savings tables. Other providers, such as BM Savings, also slashed rates on offerings, with its top paying 4.05 per cent two-year fix dropping to only 3.6 per cent, while Shawbrook Bank dumped its 4.8 per cent five-year bond before the beginning of February.
High street retail bank Halifax, who owns BM Savings, also cut the rate on its two-year fix to 3 per cent and reduced its four-year deal by 0.15 percentage points, dropping its former rate of 4.3 per cent to only 4.15 per cent. Savers fortunate enough to already be locked into an existing deal have no need to worry, but anyone with a bond maturing in the immediate future stands to be punished by the reduced rates if they wish to take up another bond.