There is a bloodbath in fixed rate bonds as interest rates are dramatically cut at some providers.
Yesterday, National Savings & Investments (NS&I) cut its three-year Green Savings Bond by a whopping 1.75 percentage points, from 5.7 percent to just 3.95 percent.
Shockingly, it is the first time that the government-backed bank has offered less than the base rate (currently 5.25 percent) on this eco-bond since its launch two years ago.
The cut means that savers who take out a bond now will earn £577 less interest over the term than if they had signed £10,000 on Monday.
It is the biggest drop to date, following a series of cuts in fixed interest rates by both banks and building societies.
National Savings & Investments has cut its three-year Green Savings Bond by a whopping 1.75 percentage points, from 5.7% to just 3.95%
Yesterday alone, rates were cut at United Trust Bank, Ford Money, Investec, Atom, Shawbrook and Tandem. And it comes after a series of cuts last week at more than twenty providers.
Companies that now drift to the top of the best buy tables will see a wall of money coming their way as savers chase the highest interest rates.
But that could soon lead to them also closing their highest-paying accounts because they’re attracting more money than they intended.
The dramatic fall means that savers of 6 per cent one-year fixed rate bonds who could benefit from challenger banks (which do not have a large presence on the High Street) have disappeared.
Higher rates from building societies such as Coventry and Cambridge of 5.75 percent have also been replaced by lower rates.
Banks and building societies go to the wholesale money markets to buy their fixed rates, which they then offer to savers. But rates have fallen here.
No one knows what will happen, but traders in this market are predicting lower interest rates.
This is good news for borrowers, but bad for savers.
Sarah Coles, head of personal finance at wealth platform Hargreaves Lansdown, said: ‘There’s a good chance they’ll fall further, so if you’re looking to fix anything, don’t hang around.’
Some providers have lowered their rates more than once. Ford Money, for example, has cut its rates in a series of cuts, from the top 6.05 percent.
After yesterday’s latest cut, the bank pays out 5.65 percent to savers who now take out a one- or two-year bond.
Other high-profile challenger banks such as Aldermore, Shawbrook and Paragon have also been busy cutting rates, to between 5.2 percent and 5.55 percent on one-year fixed rate bonds.
Interest rates on longer-term bonds have also fallen. RCI Bank has gone from 5.65 percent to 4.7 percent
The top interest rates for one-year bonds include United Trust at 5.80 percent, Secure Trust at 5.76 percent and Close Brothers’ 5.75 percent.
Higher rates are offered by lesser-known newcomers because they need to offer top rates to attract money.
JN Bank UK pays 5.9 percent for one year. The bank is the British arm of JN Bank National Group, which has been active in Jamaica for 150 years. It was founded in Britain in December 2019.
Your money at the UK bank is covered by the Financial Services Compensation Scheme, which means you’ll be reimbursed up to £85,000; £170,000 for joint accounts within seven days if it gets into trouble.
There’s obviously no way this will happen, but some savers may feel uncomfortable choosing a new name for just a small amount of extra interest.
A sum of £10,000 here will earn you £590 per year, just £10 more than the better known United Trust Bank.
Fixed rate Isa rates have also fallen sharply. Virgin Money has cut its one-year interest rate from 5.75 percent to 5.31 percent.
sy.morris@dailymail.co.uk