Banks withdraw fixed rate saving deals

Banks and building societies are withdrawing many of their best savings deals, with fixed-rate products disappearing the fastest.

Since November, 62 per cent of product changes were accounts being taken off the market, according to Moneyfacts.co.uk.

At the beginning of November, the highest fixed-rate on a one-year-bond was 3.95 per cent. Today, the highest rate available has dropped to 3.75 per cent.

The same trend also applies to two and five-year bonds.

The figures by Moneyfacts.co.uk appear to indicate that banks and building societies are returning to more traditional ways of raising funding, rather than depending on savers’ money. Savers have recently been urged to take up high-rate offers, though this might become more difficult in the next few months.

”Despite no change in bank rate since March, savers have seen rates steadily increasing, particularly on fixed-rate bonds. However, in the last few weeks the tide has turned and many top deals are being withdrawn,” said Michelle Slade of Moneyfacts.co.uk.

”The decreasing availability of top rates means that when a market-leading deal is launched, it is soon over-subscribed.”

Building societies such as West Bromwich, Manchester and Chelsea - all of which offered variable rates over 3 per cent - have recently withdrawn these deals.

Another casualty was the Melton Mowbray Online Christmas bond, which paid savers 4 per cent, the highest rate on a one-year bond. It lasted only a day.

Earlier this week, Moneynet.co.uk released similar figures.

“One of the main reasons for these bonds having such short shelf life is down to people coming to the end of a very attractive deal from one or two years ago, trying to lock in to the very best rate they can find as a replacement,” said Andrew Hagger of Moneynet.co.uk.

A fixed-rate bond taken out 12 months ago with ICICI Bank UK and Anglo Irish Bank would have yielded as much as 5.75 per cent.

A saver with a £20,000 balance would have received £1,150 in interest on a 5.75 per cent deal taken out a year ago.

“The market is particularly competitive over the one and two-year terms where there is no shortage of overseas and more niche players looking for a slice of the action,” Mr Hagger said.

He said some providers are “seemingly paying over the odds to attract money from savers especially on the four and five-year fixed rates.”

	Highest rate 1 November 2009	Highest rate today
1-year-bond	3.95 per cent	3.75 per cent
2-year-bond	4.35 per cent	4.25 per cent
5-year-bond	5.35 per cent	5.15 per cent

Source: Moneyfacts.co.uk