Competition hots up in fixed rate savings bonds market

Since March, the average rate across fixed rate bonds has dropped by 0.35 per cent, according to analysis by Britain's number one comparison site moneysupermarket.com. However, competition among fixed rate bond providers is expected to return following the launch of a set of market leading bonds called ‘Baroda MAX' from India's third largest bank, Bank of Baroda.

Bank of Baroda's launch to the top of the best buy tables for 1, 2, 3 and 5 year fixed rate bonds shows there is an appetite among foreign banks to build their UK retail savings businesses. Currently there are three Indian banks in the UK retail savings market: Bank of Baroda, ICICI and State Bank of India; all of which have fixed rate bonds in the best buy tables.

Kevin Mountford, head of banking at moneysupermarket.com, said: "At a time when we have seen rates on fixed term bonds fall, Bank of Baroda has really bucked this trend with these products which sit comfortably at the top of the best buy tables. Although it is not a well know high street name, Bank of Baroda is India's third largest bank and has been operating in the UK since 1957, although this is the first time they have offered mainstream products.

"With little appetite among traditional UK banks and building societies to attract savers it is good to see new players coming into the market and providing competitive deals for savers. Although many consumers will be cautious about investing with foreign banks after the Icelandic banking crisis, Bank of Baroda is regulated by the FSA and deposits are covered by the UK Financial Services Compensation Scheme (FSCS) which entitles savers to claim up to £50,000 for single named account or £100,000 for joint accounts, exactly the same protection you get with any of the main high street banks. "

Bank of Baroda fixed rates bonds are available exclusively through moneysupermarket.com.