Five year fixed rate bonds hitting 4.75 per cent

The interest rates on five year fixed rate bonds have been steadily climbing to a new best rate of 4.75 per cent.

Proncipality Building Society, Aldermore, and Barclays have all announced their five-year fixes will be boasting a monthly rate of return from 4.65 to 4.75 per cent.  Many banks have begun to offer the more attractive rates on longer-term fixes in order to attract income-seeking savers.

However with the Consumer Prices Index now at 4 per cent, one of the new offerings will counteract the high inflation rate after taxes, as basic rate savers need to find an offering that carries a 5 per cent pre-tax rate of return just to counteract the effects of inflation.  The current best buy from Principality pays only 3.80 per cent after taxes.  Those paying the higher rate only net a 2.85 per cent rate of return.

Personal and business bank accounts have begun to realise that savers who depend on their bonds to provide income have become increasingly anxious to find the best deals, however.  Many of these pensioners pay their essential bills such as electricity and gas with their earned interest.

However the near 7 per cent price hikes the energy industry has instituted since November 2010 have left savers ill-equipped to make do with a shorter-term bond with only two or three per cent interest rates.

Now many building societies and banks have been spurred to action amid speculation that the Bank of England’s Monetary Policy Committee will institute an increase to the 0.5 per cent base rate this coming May.

Many industry experts are even stating that another round of five-year fixes will be soon to arrive as well.

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