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Rates slashed on ‘final solution’ savings products

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Struggling savers have been dealt another setback with news that rates on long-term fixed bonds have plummeted to record lows.

These products were once the premier solution for many savers looking for a decent return.

However, the average five-year fixed bond rate has sunk to 1.69%, according to data site Five years ago, savers would have been able to get a rate close to 5%.

Charlotte Nelson, finance expert at Moneyfacts, said: “This will hit savers used to using their long-term savings to supplement their income hard, particularly as the average rate has fallen by 0.96% in just one year.”

The number of providers offering these bonds has also dropped to 27 from 31 a year ago, meaning both poor choice for customers as well as meagre rates.

Only two providers – Secure Trust Bank and Milestone Savings – offer 2% or more over a five-year fixed term.

“The low interest rate environment looks like it is here to stay for some time, and providers simply do not want to be caught out paying higher rates than may be necessary in the future,” said Nelson.

Despite the widespread cuts, long-term fixed rates still offer some of the relatively better rates.

“Savers will therefore have to weigh up the benefits of these compared to a shorter-term offer while doing their best to weather the current unpredictable environment,” Nelson added.

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