Savers opt for one-year fixed rate accounts over longer-term deals
In research published in an independent white paper covering the savings market, traffic data from Moneyfacts.co.uk found that consumers were favouring one-year fixed rate bonds over those with longer fixed terms. In fact, the research revealed that one-year fixed bonds traffic achieve a 44% share of total website visits for fixed rate bonds, while five-year fixed bonds account for just 10%.
Along with the increase in popularity of short-term bonds, our research also found that the difference in the average rate being offered on one-year fixed rate bonds and five-year fixed rate bonds has narrowed in the past year. During January 2016, the difference in average rates between one and five-year fixed rate bonds was 1.17%, while during May this year it was just 0.39%. A similar picture can be seen within the ISA market, with the difference in average rates between one and five-year ISAs standing at 0.94% in January 2016, while during May this year it was down to 0.42%.
Commenting on the research, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “As it stands, savers may not want to lock their money away beyond a year and in fact, interest rates on five-year fixed bonds may not be enough for them to consider.
“In light of these developments, savers may well be rushing to secure a competitive rate over the next 12 months before rates worsen, and as it stands there may be less demand for long-term bonds as the months progress.”
Product Spotlight: Five-year fixed rate bonds
Got a lump sum and looking for a long-term return? A five-year fixed rate bond could be just the thing:
• RCI Bank UK’s Fixed Term Savings Account offers an interest rate of 1.80% AER paid on the anniversary of opening. A minimum deposit of £1,000 is required and customers should note that while withdrawals are not permitted, further additions are allowed for 14 days from account opening. This account must be opened and managed online. For those seeking a regular income, there is a version of this account paying interest monthly at the slightly reduced rate of 1.78% gross.
• The Bank of London and The Middle East (BLME) Premier Deposit Account pays an anticipated profit rate of 1.75% AER on a minimum deposit of £1,000. Profit is paid on the anniversary of opening. As is commonplace with fixed rate bonds, no withdrawals or further additions are permitted after the initial deposit. This account must be opened online and then be managed by post only. Customers must have or open a BLME transfer account to hold funds pending investment. This bank is run in accordance with Islamic finance principles.
• Hodge Bank’s 5 Year Fixed Rate Account pays 1.60% AER on a minimum deposit of £1,000 with interest paid on the anniversary of opening. No withdrawals are permitted although further additions are allowed for 10 days after opening the account online only. While this account can be opened online or by post it must be managed by post or phone only.
Top products – At a glance
Bank relaunches 90% first-time buyer mortgage but buyers should expect delays
There are more signs of the mortgage market starting to stabilise as Clydesdale/Yorkshire Bank brings back its 90% loan-to-value (LTV) mortgage for first-time buyers. The three-year fixed rate mortgage has an initial rate of 2.39%, reverting to 4.55% variable. This mortgage has no product fee, free valuations and offers £250 cashback.
However, those looking for a mortgage with only a 5% deposit are likely to still face lengthy delays as mortgage lenders still require physical valuations at 95% LTV. Research from Moneyfacts shows that only HSBC currently offers a 90% LTV mortgage that will use automated valuations for both house buyers and those remortgaging. Aldermore Mortgages and Post Office Money offer mortgages at 85% LTV for those buying a home or wanting a remortgage, with Accord (Yorkshire Building Society’s brand for mortgage brokers only) offering remortgage only.
Those looking to remortgage or purchase a buy-to-let property will find the maximum LTV with an automated valuation available for either is from the Post Office Money at 85%. Landlords at 80% and 85% LTV can approach the Halifax or Newcastle Building Society.
Data published by Zoopla estimates that 370,000 house purchases have been delayed because of the Coronavirus lockdown. Of these, it is estimated that at least 60,000 will require a physical valuation. While the UK lockdown restrictions now allow for estate agents and surveyors to access properties for the purpose of house sales and valuations, clearing the backlog is not likely to be a fast process.
A mortgage broker has the information to hand and can help guide buyers to find the best mortgage for them. Read our guide to find out more about how mortgage brokers can help buyers find a mortgage.
Product Spotlight: Five-year fixed rate remortgages
If you are looking to remortgage and want the security of locking your new mortgage into a longer fixed term, our five-year fixed rate remortgage chart is offering some competitive rates.
• HSBC’s fixed mortgage deal offers a rate of 1.36% (2.8% APRC) fixed to 30 September 2025, which then reverts to 3.54% variable. This deal is available to those seeking a maximum 60% loan-to-value (LTV) up to £5 million with a minimum loan limit of £10,000. However, this deal is also restricted to those with a minimum income of £75,000 per annum. It charges £1,499 in product fees but comes with the incentive of free valuation and free legal fees.
• HSBC is also second in our chart this week with its fixed deal that offers a rate of 1.39% (2.8% APRC) fixed to 30 September 2025, which then reverts to 3.54% variable. It is available to all borrower types who are looking for a maximum 60% LTV and a maximum loan of £5 million. In contrast to the first-place entry, this has a lower minimum income requirement of just £15,000. It charges £999 in product fees and includes the incentives of free valuation and free legal fees.
• Virgin Money takes third place in our chart, with a deal offering a rate of 1.42% (3.2% APRC) fixed to 1 September 2025 before reverting to 4.34% variable. This deal is available for remortgagers only looking for a maximum 65% LTV and is available for loans up to £1 million. The product fee is £1,495, and this deal comes with the attractive benefits of free valuation and free legal fees.
Rep example: £178,000 mortgage over 25 years initially at 1.34% fixed for 28 months reverting to 3.59% variable for term. 28 monthly payments of £698.58 and 272 monthly payments of £880.90. Total amount payable £260,480.04 includes loan amount, interest of £81,165, valuation fees of £0 and product fees of £995. The overall cost for comparison is 3.3% APRC representative.
Act quickly to secure the longest 0% balance transfer credit cards
As some credit card providers start to reduce the length of 0% promotional terms, those looking to move a balance to a credit card will need to act quickly before the longest deals disappear. Here are the current longest deals available for 0% balance transfer cards.
TSB’s Platinum 30 Month Balance Transfer Mastercard tops the chart with 0% interest for balance transfers for 30 months. This is the longest term available and comes with a transfer fee of 2.95% and an APR of 19.9% variable. There are no minimum income requirements, but application and management are online only for those aged 18 years or over.
Second in our charts is the MBNA’s Limited Long 0% Balance Transfer Mastercard. This offers a 0% interest period of 29 months – only a shade under the TSB’s 30-month offering – but benefits from a lower balance transfer fee of 2.75%. No balance transfers from existing MBNA cards are accepted and there is an APR of 20.93% variable per annum for purchases. Application and management are again online only for those aged 18 years or over and who earn a minimum of £14,000 per annum.
NatWest’s Longer Balance Transfer Credit Card Mastercard offers a 0% interest period for 28 months from the date of card issue but is restricted to existing customers only who are over 18 and have a minimum income of £10,000 per annum. Those who do qualify can take advantage of the 2.75% transfer rate with a representative rate of 19.9% APR variable.
Further offers are available on our 0% balance transfer credit card comparison table.