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Fixed rate bonds could crash this winter, expert warns

12. Oct, 2011 Categories: Business Bank Account Updates, News by Business Bank Accounts 0 Comments

As if the nation’s savers don’t have enough to worry about with inflation eating away at their interest rates, now one expert has warned that fixed rate bonds may crash this winter.

Because personal and business bank account providers are currently finding it a struggle to finance them, some of the most lucrative fixes are walking a razor-thin edge, and with around 535,000 of them maturing this month, nearly half a million savers are being informed that they need to jump back into the market before rates fall through the floor.  This has led Post Office savings head, Richard Norman, to warn that banks are holding their rates abnormally high in an effort to remain competitive and to entice this massive influx of new customers.

Mr Norman says that the result may be that rates could plummet in as soon as two months once the rush for new bonds abates.  However, other industry experts say that shorter-term rates have remained steady, though longer-term fixes may have seen a drop over the past few months.

The gap between five-year and one-year fixes has narrowed significantly in this time, and in fact stands as the least gap in two years, a fact that experts say could mean that the savings tables may soon turn.  With the Monetary Policy Committee of the Bank of England recently voting to renew its quantitative easing scheme, which could end up making inflation even worse, many economists are bracing for quite a hard blow to the economy as a result of a reduction in interest rates of fixed rate bonds.

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Tags: Business Bank Account Updates, fixed rate bonds, interest rates