5% on fixed rate savings disappear

Andrew Hagger of Moneynet.co.uk looks at the latest moves in the fixed rate savings market. For the first time in 12 months it is no longer possible to achieve a five per cent or more return on a fixed rate bond with the best rate now available 4.75% from ICICI Bank UK for a five year term.

Back in June 2009 savers were faced with a similar situation, however in September and October last year rates recovered to a high of 5.65% for a five year bond. Since reaching that relative high point the rates have gradually fallen and now once again savers are faced with sub five per cent rates even if they lock their cash away for half a decade.

Whilst a rate drop of 0.90% (5.65% to 4.75%) may not sound a big deal, for someone with a £50,000 deposit it means £1800 less interest over the five year term, or £30 less per week after basic rate tax.

In November 2008 it was still possible to get 7% on fixed rate bonds for 1, 2 or 3 years, so there are still plenty of people due to come off one of these excellent rates and will be horrified that the new deals on offer will be paying such a miserly return in comparison.

2010 has so far been nothing but misery for savers, particularly those relying on their nest egg to provide additional income, and with VAT rises on the horizon, some consumers will be reaching the end of their tether.