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USwitch.com warns of fixed-rate dangers

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by David Masters
USwitch.com warns of fixed-rate dangers

USwitch.com has warned against the dangers of stashing savings away in a fixed-rate bond.

Nine million savers have opened a fixed-rate bond in the past year, with 87% choosing a bond over an instant access account because it was the only account they could find paying a “decent” rate of interest.

USwitch.com found 10% of savers who chose a fixed-rate bond have needed to make withdrawals to cover the cost of rising bills or because they lost their job.

These savers have faced an average penalty of £132.

“Fixed rate savings accounts can offer consumers some really competitive returns, but the reality of this extra interest can be harsh”, said Rumina Hassam, uSwitch.com savings expert.

“Almost half of the accounts available do not allow consumers to access their cash under any circumstances which, in a climate of recession and redundancy, this is a dangerous situation for some people.

“The devil really is in the detail as far as fixed-rate savings are concerned.

“Even if consumers are allowed to make withdrawals, the extra interest earned could be completely wiped out.”

Hassam also said she expects the base rate to creep up over the next year, which could leave long-term fixed-rate accounts looking like a poor deal.

Nearly one in five (17%) savers who have opened a fixed-rate bond said on reflection, they made a rash decision.

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News posted: October 2, 2009

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