Short-term 'the way to go' with fixed-rate savings
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Those debating whether to go for a savings account with a short or a long-term fixed rate of interest have seen some help from Moneynet.co.uk.
Research by the site shows that locking away £50,000 into a five-year fixed-rate savings account in the UK when the base rate first dropped to its lowest level of 0.5 per cent would have left the customer £7,000 worse off than if they had invested their money eight months earlier.
Depositing the same amount today would also have seen the customer still £4,700 worse off, Moneynet.co.uk claims, illustrating the volatility of the savings account market in the UK throughout the current economic climate.
Andrew Hagger, PR and communications manager for the website, claims that short-term options are always best for fixed-rate savings accounts when interest rates are low, while longer period investments should be made when they are slightly higher.
Mr Hagger commented: "An approach where you don't put all your savings eggs in one basket may be a strategy worth considering; perhaps spreading your cash between fixed terms of one and three years to hedge your bets and to take advantage of rate increases that may be available in 12 months' time."
"With providers still battling ferociously for best buy status, it is likely that fixed-rates will continue to edge higher, especially as wholesale money markets may prove too expensive an option for some building societies which saw their investment ratings cut by Moody's in April this year," he added.
Santander, made up of Abbey and Alliance and Leicester, recently announced that interest rates on its one-year fixed-rate savings accounts in the UK will rise to six per cent.
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