Money Insider: Skipton raises the bar with new one-year savings bond

a couple of weeks ago I predicted that interest rates paid on one-year fixed rate bonds may rise as banks and building societies look to tap into the huge sum of maturing funds at NS&I. Lo and behold, in the last week we've seen the best-buy rate of 3 per cent gross easily surpassed.

The Coventry Building Society took top spot at first with its one-year Poppy Bond at 3.11 per cent, only to find itself knocked into second place just a few days later, courtesy of a new 3.3 per cent e-bond from Skipton Building Society.

This stand-out deal from the UK's fourth-largest building society will act as a magnet for savers desperate to lock into a top rate, and could well see the account being oversubscribed within a a couple of weeks.

Mortgages: Is it time to consider a fixed rate?

the number of remortgage searches on Moneynet climbed 32 per cent in October compared with the previous month, and it seems that consumers are suddenly starting to consider their options.

It's not clear what has triggered this change of heart: it may be down to the recent spending review announcement or surprisingly positive GDP numbers, but it could also be that some of the ultra-competitive rates out there may have reached a level that now make them a serious alternative to sitting on your lender's standard variable rate.

To give you a flavour of some of the keenest fixed rates currently available, Yorkshire Building Society has a two-year fix at 2.89 per cent with £495 fee (max 75 per cent loan-to-value), Chelsea Building Society a three-year deal at 3.29 per cent with £995 fee (max 75 per cent LTV), and if you're looking longer term, you can get 3.89 per cent fixed for five years at First Direct with a fee of only £99 (max 65 per cent LTV).

It's not an easy call for mortgage borrowers at the moment, but it's important that consumers are not swayed by others and seek guidance based on their individual situation. With a fixed rate, you may find yourself currently paying over the odds when compared with some tracker deals, but the security and peace of mind offered by a fixed affordable monthly repayment will still be the key factor for many.

Savings overview

it's two years since the previous government ramped up its savage base rate cutting strategy with an eye-watering 1.5 per cent reduction, and since then it's been one long nightmare for savers struggling to find a decent home for their nest eggs.

The rates available and interest income for consumers coming to the end of existing fixed rates are now drastically lower.

To give you an example of the rate shocks being felt, two years ago you could find a two-year fixed bond paying 7 per cent gross from Anglo Irish Bank and ICICI Bank UK, whereas the best two-year rate today is 3.65 per cent with Post Office. On a £20,000 bond your return net of basic tax would fall from £2,240 to £1,168 over the term.

Customers who opted for a best-buy three-year bond in November 2007 could have fixed with Yorkshire Bank at 6.65 per cent. If they're now looking to reinvest for a further three years, the best-buy rate from Bank of Cyprus UK is just 4.15 per cent. Someone with a £20,000 bond would see their return net of basic tax slashed from £3,192 to £1,992 over the term.

Andrew Hagger is a money analyst at Moneynet.co.uk