It pays to fix your savings

New analysis by first direct shows that over the past decade fixed rate deals have offered better returns than the variable rate products on offer during the same period.

On average, not fixing has cost UK savers £629million in interest each year, or £78.50 in interest per savings account, according to analysis of the years 2005-2010 shows.

Not surprisingly 2008, the year that saw the Base rate plummet to the current 0.5%, was the worst year for variable rate savers when compared to returns on fixed rates.  The average interest rate with a 1 Year Fixed Rate Bond was 5%, while instant access rates varied between 2.77% in January 2008 down to 0.49% by December 2008. Over the course of that year, savers missed out on an average £92.78 in interest. There were 9 million variable rate savings accounts opened in 2008, with an average balance of £2,932, on which there was a total loss in interest of £835.4 million.

The worst returns for instant access savers were in 2009 and 2010 with interest rates varying month on month between 0.16% and 0.23%.

Richard Brown, Senior Savings Product Manager at first direct commented: "Savers often face the dilemma as to whether they should fix their savings or choose a variable rate. This historical analysis shows that fixed rate pricing over the past decade has consistently offered better returns when compared to both instant access and notice accounts. However, with the Base Rate set to go up in future the key to deciding whether to fix or opt for an easy access account is working out when that change will come.

"There are clear advantages to opting for a fixed rate including a guaranteed return at the end of the term, however easy access accounts do have their own advantages in offering ready access to your money and the option to move it at short notice. As a general rule it is advisable to have a mixture of savings in accounts that can be easily accessed in addition to having some that you are able to tie up for longer periods."