moneysupermarket.com: Rate rises in the bond market

Commenting on the spate of rate rises in the bond market, Kevin Mountford, head of savings at price comparison website moneysupermarket.com, said: “Further rate increases in the bond market could result in other providers becoming shaken and stirred.

“Two providers last Friday announced an increase to their short-term bond interest rates, following in the footsteps of several other providers this week. Halifax now offers bonds from three months to five years paying between 6.29 per cent and 6.6 per cent AER. The top dog for now – as its offer is across the board with a minimum deposit of just £1 – is the Coventry Building Society with its new one, two and three year cash bonds paying 6.55 per cent AER.

“The Bank of Cyprus – a consistently strong performer in the market – completes the trio of providers offering bonds with rates above 6.5 per cent.

“Currently fixed rate deals are a good option for consumers since these products are generally priced according to the markets' swap rates. One year rates have recently climbed above 6.3 per cent.

“People fortunate enough to be able to lock some of their money away for a set period of time can really make their money work harder for them – a one year fixed rate bond will earn in the region of half a per cent more than an ‘easy access’ savings account.

“As a word of warning: people must keep a close eye on the account’s maturity date. Fixed rate products will often default to low paying accounts when the term of the deal expires.”