Savers must switch to better rates when fixed rate bond deals end
Wednesday, 05 October 2011 11:24
Savers are being reminded to switch accounts when higher introductory rates on their savings accounts run out.
Many savers sign up to excellent fixed rate bond deals that have high rates initially, but then forget to switch to a better deal when the bonus rate ends.
Savers are potentially losing hundreds of pounds by not checking and switching savings accounts, especially as average rates on savings accounts are increasing.
The best fixed rate bonds deals were around three per cent or just under in September 2010. However, these deals last for just one year, before dropping off to a lower interest rate, often at around 0.5 per cent, sometimes even lower.
For instance, the Turkish Bank was offering a one-year fixed rate bond at 2.90 per cent in September 2009. If you invested £15,000 in this, you would have earned interest of £435. At the end of the bond term, the rate slipped to just 0.1 per cent, which means interest earned after the introductory rate expires would be just £15.
However, the top one-year fixed rate bonds are now paying around 3.5 per cent. So if the saver switched from the Turkish Bank to one of the new top one-year fixed rate bond deals, paying around 3.5 per cent, they could earn a further £500 or more in just one year.
If you are in this position it really does make sense to switch to a better deal on maturity.
Kevin Mountford, head of banking at MoneySupermarket said: "Since the financial crisis, Autumn has been a peak period for people renewing fixed rate bonds and many savers will be seeing their bonds reach maturity over the next two or three months.
"Savers cannot always rely on their banks to remind them their product term has come to end. If you fail to respond to any maturity notification or fail to act, some providers will automatically enrol you into another bond, tying your savings up for the term of the product, or they will place your savings in an account paying a poor rate of interest.
"With signs indicating Base Rate will remain low for the foreseeable future, locking money away for a fixed term of even a year could be a good option for savers looking to get some extra bang for their buck.”
Use the Myfinances.co.uk comparison tables to find the best deal on savings bonds.
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