Banks are required to hold an increased proportion of their savings deposits
as reserves rather than using them for lending purposes after changes
implemented by the Treasury following the banking crisis.
As fixed-rate savings generally do not allow the saver to access funds during
the term of the deal, the banks can plan more effectively to ensure they
have enough money in reserve to meet statutory requirements.
The demand for higher savings rates is driving even more modest savers to seek
out fixed-rate investments over easy access. Research from the Yorkshire
Building Society found a quarter of its savers were looking to invest less
than £5,000 in a five-year fixed-rate bond, with the average balance
invested £20,000.
Unsurprisingly, the research showed 91pc of savers taking out fixed-rate bonds
were aged 45 years and over. Many older savers have built larger savings and
are looking to capitalise on the higher rates that fixed-rate deals offer
over variable-rate accounts.
Barnsley in top spot
Barnsley Building Society has just increased the rate on its Online Bond to a
market-leading 4.7pc. A monthly interest version is also available for those
looking for a more regular income. The bond matures on February 28 2013 and
savers can invest between £100 and £2m, with further additions permitted
while the bond remains open. Once opened, savers cannot access funds during
the term.
Sarah Lawrence, senior savings product manager at Barnsley Building Society,
said: …
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