N&P hits top spot in 1 year bond best buys

Andrew Hagger of Moneynet looks at the latest developments in the fixed rate savings market. With a 1 year fixed bond rate of 3.55% AER, Norwich and Peterborough BS has today moved to the top of the best buys with its new E-Bond offering a rate that hasn't been bettered on a 1 year fixed bond for almost 18 months.

The mutual sector continues to rely heavily on retail savings to fund new mortgages, so it's no real surprise to see four of the current top seven one year bonds being offered by building societies.

The shorter term fixed rate market seems to have become more competitive of late and the rates are holding up much better than for some of the longer term deals.

Savers are desperate to get the best deal they can, but with the rate differential between a 4 year deal and a one year deal just 0.70%, the incentive to opt for a longer term has faded (in Feb 2010 the difference was 1.35%).

It's heartening to see increased competition in the short term market, however with demand so strong, I don't expect the N&P deal to still be around in a month from now.

While mutuals and niche players battle it out for short term retail deposits, this is obviously not part of the strategy employed by the high street banks highlighted by the fact they don't appear at all in the current top ten 1 year fixed rate deals.