With the nation’s inflation rate is predicted to fall this year, fixed rate bonds may soon become excellent ways to make your savings pots grow over the next year or two, experts say.
With one- and two-year fixes paying as much as 3.48 per cent interest rates after basic tax, the attractiveness of the savings products is growing. With inflation expected to decline by a significant margin down to 2 per cent by December of 2012, basic rate taxpayers can look forward to no longer having their returns eroded by the force of inflation since the cost of living began its upward spiral two years ago.
Once inflation drops, those paying the basic tax rate need to find a personal or business bank account provider offering a product with at least a 2.5 per cent interest in order to break even, while those paying the higher rate need to find a savings product that nets them 3.34 per ct. The current one-year fix best buy, offered by AA, pays a 2.88 per cent rate after basic tax.
For two year or longer fixes, BM Savings is currently offering after tax rates of 3.24 per cent, while Shawbrook Bank has an after tax best buy offering of 3.48 per cent. However, industry experts were quick to warn savers about moving your money once your bond comes of age, as neglecting to do so can leave your cash in an account with a very poor rate of return.