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One-year bond rates at near three-year high

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If you can afford to tie your savings up for a short period, it may be a good time to move your money as rates on one-year bonds have reached a near-three year high.

One-year bonds – or one-year fixed rate savings accounts – pay you a fixed rate for 12 months but you’re generally not allowed to take money out until the term is up.

The average deal today pays 1.47%, the highest seen since January 2016, and up from the low of 0.99% recorded in October 2016, according to analysis by Moneyfacts.

This month alone, 12 savings providers increased their one-year bond rates, with some notable rises of up to 0.51%.

The best deal pays 2.05% from Sharia-compliant BLME, followed by 2.03% from Shawbrook Bank.

By comparison, the top rate you can currently get on an easy access account is 1.5% from Marcus by Goldman Sachs.

Rachel Springall, finance expert at Moneyfacts, said: “Savers may be contemplating how they can secure a decent return on their nest egg next year, particularity if they are concerned about economic uncertainties. Thankfully, providers have been eyeing up the one-year fixed bond market this month, giving savers better rates to choose from.”

Challenger banks

Unsurprisingly, the challenger banks have been stirring up competition in this part of the market.

Last week Shawbrook Bank raised its rate to 2.03%, just shy of market-leader BLME at 2.05%.

Zenith Bank and Ikano Bank also upped their rates to 2.02% and 2.00% respectively this month while Tesco Bank increased its rate from 1.40% to 1.91%.

Springall said: “Just 12 months ago, not a single bond on the market paid 2% over a one-year term, but it’s become more commonplace today to secure this rate, as all of the current top 10 best deals pay 2% or more. “These rates are also far better than those seen at the start of this year, with the top 10 one-year bonds returning 1.74% on average in January.”

She added: “While some of these rate rises may well have been on the cards for a few weeks, it is actually a great time to shake up the market as we edge ever closer to the end of the year. Some savers may be coming to the end of their fixed deal and want to reinvest, but feel uncomfortable tying their money down over the longer term.

“As many of the new offerings are from less familiar brands, savers will need to keep on top of the latest Best Buys so they don’t miss out on the improved returns generated from this latest competition, particularly if they fail to get online.”

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