Average rates for fixed rate savings bonds have increased in the last two months despite base rate staying at a record low of 0.5 per cent.
Research from Moneysupermarket.com shows that rates for 1,2,3 and 4year fixed rate savings bonds have all risen which has led to more people taking out fixed rate bonds.
The current average rate for a two-year fixed rate savings bond is now 3.76 per cent, up from 3.67 per cent in May. One year bonds are up from 3.43 per cent to 3.48 per cent, three-year fixed rate bonds have increased from 3.88 per cent to 3.95 per cent and four year deals have risen slightly, from 3.98 per cent to 4.01 per cent.
The fixed rate savings bond deals are becoming even more attractive as inflation falls. Inflation fell to 2.8 per cent in May, down from a high of 5.2 per cent in September 2011.
This means that fixed rate savings bonds offer investors a real rate of return for the first time in over a year.
Kevin Mountford, head of banking at MoneySupermarket said: “For those who are able to lock their money away for a while, fixed rate bonds are very appealing and the rates are certainly stronger than the lower levels seen over the past year. The average one year rate on a fixed rate bonds is 0.19 per cent higher than the market leading easy access account so even tying your money for a short period can be worthwhile.”
Sign up to the Myfinances.co.uk newsletter to receive the latest financial news direct to your inbox.