Saving rates have dropped off significantly over the last year. One of the many areas to suffer has been fixed rate bonds.
According to figures from financial information website Moneyfacts the average rate on a one-year fixed rate bond today is just 1.60%, compared to 2.70% a year ago.
Elsewhere a two-year fixed rate bond pays around 1.85% today. But at the same time last year a typical account would bring in 3.34%.
The government’s Funding for Lending Scheme has been blamed for driving rates down, as it provides banks and building societies with access to cheap money, meaning they don’t rely on deposits as much. The record low Bank of England base rate has also been cited.
Whatever the reason, rates have been on a downward spiral and it's been a pretty bleak time for savers.
But this week things have taken a turn for the better. A number of providers seem to have gone into reverse and instead of slashing rates have put them up…
The Co-operative’s play
The Co-operative Bank has boosted the rates on two of its fixed term savings accounts available via Britannia.
Its one-year fixed rate bond now pays 2.03% (up 0.38%) while its two-year deal has been boosted to 2.21% (up 0.31%).
Both accounts are available to new and existing customers and can be opened with just £1,000.
The Co-operative said that it was passing on the benefits of a recent rise in swap rates.
The two-year deal now sits in the top four best buys, while the one-year deal has been pipped to the top of the table by simultaneous changes from Kent Reliance Building Society.
KRBS takes the lead
Kent Reliance Building Society has also upped the rates on two of its fixed rate savings accounts.
The KRBS one-year fixed rate bond will from today pay 2.05% (up 0.55%) and the two-year fixed rate deal will pay 2.35% (up 0.35%).
Both deals are market leading and it’s not by chance. KRBS said it had designed them to top the best buy tables to demonstrate its commitment to offering savers value for money.
The one-year bond pays 0.05% more than the next best deal from Raphael’s Bank, which offers a rate of 2%. Kent Reliance’s deal also surpasses the top 18-month fixed rates of 2% from Metro Bank and the Islamic Bank of Britain.
Elsewhere the two-year rate again holds a 0.05% lead on the market. The next best deal comes from the Islamic Bank of Britain, which offers 2.32% and ICICI Bank, which is paying 2.30%.
However, the KRBS bonds are limited edition so are likely to disappear quickly.
Halifax launches an attack
Halifax has also given its fixed rate bonds an overhaul, with rates being boosted by up to 0.45%. Here’s what they look like now:
The shiny new rates look promising and you can get access to any with just £500, but upon closer inspection they fail to dazzle. None are market leading, but do sit comfortably among the best rates around.
The two-year Halifax bond for example is positioned among several other providers offering 2.10% including the Post Office, Coventry Building Society and Tesco Bank. But the leading rate in this area is now Kent Reliance’s 2.35%.
The three-, four- and five-year offerings take up a similar mantle, settling among the top accounts but not really making a play for the top. The leading rate on a three-year deal is 2.55% and comes from ICICI Bank, while you can get a top rate of 2.55% from Shawbrook Bank on a four-year deal. The best five-year return comes from First Save and Shawbrook Bank which both offer 2.90%.
Savings on the rise
These three top names have upped their rates all in the same week, which could signal a new attitude towards savers and a turning point for rates.
Apart from Halifax, the Cooperative Bank and KRBS, Skipton Building Society has also launched new summer rates on its fixed rate bonds. Although these are not remarkable, with only the five-year deal paying 2.40% making an impact, it's referehsing to see more deals launched rather than savings accounts being closed down.
And even though the small skirmish at the top of the one-year and two-year deals between KRBS and the Co-operative doesn't involve epic rate rises, it's a positive sign to see them rise at all.