Fixed-rate Bonds Likely to Have Peaked, Warns Expert

Savers waiting for a rise in fixed-rate bonds are warned that they might have peaked. As uncertainty grows over whether the Bank of England will continue to push the use rate higher to combat inflation. However, some experts still predict some wriggle room for easy-access accounts. According to analysts, it is no longer best for savers to wait for fixed-rate deals to rise from their current level of 4%.

The Issue with Bank of England’s Base Rate

The Bank of England’s base rate has risen from a historic low of 0.1% to t%. However, there is growing concerned over whether the Bank of England will continue to raise its base rate to control inflation. Last week, the governor of the Bank, Andrew Bailey, quashed the idea that the Bank will continue climbing. Instead, he mentioned that “some further increase in bank rate may be appropriate, but nothing is decided.”

The Current Situation and Possible Outcomes

Although it is forecasted that inflation will fall back sharply later this year from its current 10.1% and reach its target of 2% by early next year, many experts predict that we might soon be close to reaching the top of the savings rate increase cycle. For example, Kevin Mountford, the co-founder of Raisin’s savings platform, says, “If the base rate does rise, there is more wriggle room on variable rate accounts than on fixed rates.”

Fixed-rate Bonds Vs. Variable-rate Accounts

Fixed-rate bonds and variable-rate accounts are priced differently. The former reflects what wholesale money market traders think will happen to rates from here on in. They have ticked upward in the last few weeks, but this could be short-lived following the governor’s recent comments. The variable-rate accounts, however, are priced on base rate – and we could see an interest rate rise later this month when the Bank of England decides on March 23.

Competition Has Returned to the Savings Market

Banks and building societies make money by paying savers. Therefore, as competition has returned to the savings market, providers have not increased their rates by as much as the Bank of England rises but will do so if the base rate goes up. So it’s still possible for banks to pay more on their variable accounts, even if the Bank of England doesn’t increase its base rate.

Related Facts

• Fixed-rate bonds and variable-rate accounts are priced differently, which makes them vulnerable to different market conditions.
• Inflation is expected to fall sharply later this year from its current 10.1% and reach its target of 2% by early next year.
• There is a casino guarantee that easy-access accounts will rise beyond their current levels.

Key Takeaway

Fixed-rate bonds might have peaked due to the uncertainty of whether the Bank of England will continue to push the base rate higher amid concerns over inflation. However, some experts predict that easy-access accounts might still have some wriggle room. In addition, banks have started to pay savers more due to increased competition, making it the best time for savers to reevaluate their options.

Conclusion

It might no longer be best for savers to wait for fixed-rate deals to rise from their current level of 4%. At the same time, it’s essential to consider the different market conditions that affect fixed-rate bonds and variable-rate accounts. However, competition in the savings market has returned, and banks offer good rates, making it the best time for savers to shop around and get the best deal.